Fannie Mae increased its fund for credit losses by more than $200M in 2024, and the agency said in its annual report that it remains vulnerable to fraud.

The federally backed mortgage lender set aside $752M for credit losses in its multifamily business for all of 2024, up from $495M in 2023. Fannie Mae is continuing its ongoing efforts to increase due diligence on its loans, but it said it remains at risk of approving fraudulent loans.

“Until we implement our remaining planned process improvements for managing multifamily loan origination fraud risk and oversight of multifamily seller/servicer counterparties, we may face a higher risk that we will be unable to detect or prevent fraudulent multifamily lending transactions,” the agency report said.

The increased provision for credit losses was largely the result of transactions in which at least one party committed fraud, the agency said, although declining multifamily values and increasing loan delinquencies also played a role.

Last year’s 51% increase in Fannie Mae’s funds for losses is still below the $1.3B set aside in 2022.

“We continue to investigate additional multifamily lending transactions in which we suspect fraud may have occurred and may discover additional multifamily loans we have purchased that were affected by fraud,” the agency said in the report. “Certain gaps have been identified in our processes for managing multifamily loan origination fraud risk and for overseeing our multifamily seller/servicer counterparties.”

Fannie Mae and its related government-sponsored enterprises Freddie Mac have both been introducing reforms, including increased scrutiny on loans involving brokers and strengthened “Know Your Customer” provisions, to its lending process in an effort to root out fraud.

The agency first acknowledged that growing fraud was weighing on its balance sheet in October. It finished the year with $2.5B in net income and $4.7B in net revenue for its multifamily lending arm.

The growing provision for credit losses comes amid a rising chorus from some corners of the financial world, including several executives who are close to President Donald Trump, to release Fannie Mae and the other government-sponsored enterprises from conservatorship.

In January, after Trump won a second term but before he was sworn in, the U.S. Treasury Department formally kicked off the privatization push, directing the Federal Housing Finance Agency to begin unwinding its oversight over the mortgage lenders put in place after the Great Recession.

“Markets expect — maybe not immediately, but over the course of the second Trump administration — much more of an effort to release them from conservatorship,” Mike Fratantoni, senior vice president and chief economist at the Mortgage Bankers Association, told Bisnow in December. “From a market participant's perspective, it's really a question of, what does that look like?”