Fannie Mae CEO Priscilla Almodovar On Solving The Unaffordability Crisis And Fannie's Transformation

The need for affordable housing is pressing, but solving the crisis will require greater coordination between developers and various levels of the public sector. 

Walker & Dunlop CEO Willy Walker said on this week’s Walker Webcast that given the amount of money that Fannie Mae, Freddie Mac and the Department of Housing and Urban Development supply to the housing industry, it seems as if there is an abundance of capital in Washington, D.C., ready to be put toward housing affordability. But he hinted there may be a disconnect at the local level regarding land-use management and entitlement. 

Fannie Mae CEO Priscilla Almodovar called for greater integration between federal and local policies.

“How do you create incentives that align the two?” she said. “That's the challenge.”

Walker sat down with Almodovar to discuss the housing affordability crisis, what many people don't understand about Fannie Mae and how her experience in the public and private sectors has shaped her leadership style.

Walker asked Almodovar one of the industry’s most important questions: Why is it so difficult to build affordable housing? 

The answer, Almodovar responded, involves a lot of moving parts.

“It all comes down to numbers,” she said. “You need land, you need financing and you have to charge the rents. To keep all of this affordable is not easy.”

Lack of supply in the single-family market can also be attributed to the “lock-in effect,” where 80% of consumers today have a mortgage that is 5% or lower — 200 basis points below current rates. This causes people to lock-in their rate and sit on their homes for longer, causing available inventory to sink.

Another factor playing into this struggle is NIMBYism, which Almodovar said she has seen throughout her career. Making housing more affordable will take stakeholders coming together and having the courage to build more housing in the face of neighborhood pushback, and that's ultimately what the industry is starting to see now, she said.  

“Supply has been an issue for a long time, since the Great Financial Crisis,” she said. “We are in a time of unprecedented unaffordability in this country.”

Almodovar said Fannie Mae is trying to address the lack of adequate supply. The government-sponsored entity renovates its REOs and sells 90% to homeowners. For low- and moderate-income buyers of REOs and other properties, Fannie Mae offers HomeReady, a mortgage product that requires only a 3% downpayment. 

On the multifamily side, Fannie Mae is trying to preserve and create more housing by delivering capital to about 20% of the U.S. multifamily market, making it one of the biggest lenders in this space.

Almodovar said creating more housing options involves working with sponsors from the conventional housing space to dedicate some of their units for individuals at 120% of area median income or lower. 

“It really is all hands on deck and takes coordination on all levels of government,” she said. “Understanding that everyone has to give something to build this housing is key, but the numbers have to work as well for developers. Many developers are not going to build if the deal doesn't pencil out.”

The net worth of Fannie Mae has continued to go up, reaching $86B. But because the company entered into a conservatorship controlled by the Federal Housing Finance Agency in 2008, Walker asked how much messaging still needs to be done as it relates to the safety and soundness of the company. 

“The No. 1 thing that surprises me is that even within our industry, people do not understand how substantially transformed Fannie Mae is,” Almodovar said. “If there's one thing I do while I'm here it’s to try and close that perception gap.”

Almodovar said Fannie Mae’s business model has been transformed since the GFC. Previously, the company held an extensive retained investment portfolio. Today, its business is centered on guaranteeing loans and selling them as part of mortgage-backed securities to investors. Lending standards have changed and loss mitigation tools exist now that didn’t 15 years ago.

She added that it has also been retaining earnings since 2019. 

“We’re a well-run business that’s risk-managed and well-governed,” she said. “We have an incredible board of directors, and I'm going to keep telling that story for as long as I'm in my chair.”

Walker asked Almodovar if mortgage rate cuts are in the near future and if there is going to be a rotation out of money market funds and into longer duration funds as the Fed fund rate comes down. 

Almodovar said Fannie Mae’s economists are more conservative than others out there, but they ultimately think there are going to be two rate cuts, one in September and one in December at 25 basis points each.

“[The economy] is slowing down, but it's still growing,” she said. “You won't probably see them go south of 6% prior to the fourth quarter of 2025.”

Looking back on Almodovar’s career path, Walker asked why she made the switch from the private sector as a partner at one of the nation’s largest law firms to the public sector working for state housing agencies.  

“I loved finance, and then I discovered housing,” she said. “I found this industry where I could have a huge impact on people and the mission. I grew up as a renter, my parents came from Puerto Rico in the 1950s and they bought their first home when I was 5 years old. So I found something where I can give back and still do complex, interesting work.”

From starting her career as a corporate attorney at global law firm White & Case LLP to leading Fannie Mae since 2022, Almodovar said it has always been about mission, purpose and people. 

Her other past leadership positions include serving as president and CEO of Enterprise Community Partners, an organization working to increase affordable housing, managing director at JP Morgan Chase and president and CEO of the New York State Housing Finance Agency. 

“Each [role] I’ve had has given me a bigger platform to hopefully have a bigger impact,” Almodovar said. “Fannie Mae is the culmination of all of it because I think it's one of the rare jobs that touches all of housing, from rentership to homeownership.”

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This article was produced in collaboration between Walker & Dunlop and Studio B. Bisnow news staff was not involved in the production of this content.

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