navycmdr
9 hours ago
May 1, 2024 - Transcript: Freddie Mac CFO Discusses First Quarter 2024 Financial and Business Results
Christian Lown - Executive Vice President and Chief Financial Officer
Remarks of Chris Lown
Introduction
Good morning and thank you for joining our call to review Freddie Mac’s first quarter 2024 financial results. Before I move on to our earnings, I’d like to offer some brief remarks about the mission our financial performance supports.
In the first quarter, Freddie Mac helped make it possible for hundreds of thousands of families to rent, buy or refinance a home. Ninety percent of the rental homes we helped finance were affordable to low- and moderate-income families. First-time homebuyers represented 52 percent of new single-family home purchase loans. That’s a new high for us.
We are working to extend these opportunities to more borrowers and renters in a safe, sound and sustainable way. Here are three examples of how we moved toward that goal since the beginning of the year:
First, we added to our affordability toolkit for very low-income homebuyers. Through our Home Possible Very Low-Income Purchase Credit, eligible families earning 50 percent or less of area median income can now receive a $2,500 credit to help them with closing costs or a down payment.
Second, we made mission-focused investing easier for the firms that supply liquidity to the U.S. housing finance system. Updates to our Mission Index could help investors identify mortgage-backed securities meeting their social investment goals.
And third, we continue to update our risk-management practices. We recently announced Multifamily policy and process changes—including enhanced property inspection requirements and appraisal reviews—that further strengthen our underwriting due diligence and risk mitigation.
Through these actions and others, Freddie Mac is helping to make home possible for families across the country in a safe and sound manner.
Now let’s take a look at our financial results.
Financials
We earned net income of $2.8 billion this quarter, an increase of $771 million, or 39 percent, year-over-year. This increase was primarily driven by higher net investment gains and higher net interest income which benefited from higher rates.
First quarter net interest income was $4.8 billion, up 6 percent year-over-year. The Single-Family mortgage portfolio grew 2 percent and saw a 1 basis point increase in the average estimated Single-Family guarantee fee rate. Higher investment income benefiting from higher short-term interest rates also contributed to the increase in net interest income. These positive drivers were partially offset by lower deferred fee income recognition resulting from slower prepayments due to higher mortgage rates.
Non-interest income for the first quarter was $1 billion, an increase of $672 million from the prior year quarter, primarily due to an increase in net investment gains in Multifamily.
Our provision for credit losses was $181 million for this quarter, driven by modest credit reserve builds in both business segments, compared to a higher provision expense of $395 million for the prior year quarter, which was primarily attributable to new acquisitions in that period.
Our total mortgage portfolio at the end of this quarter was $3.5 trillion, a 2 percent increase year-over-year.
Single-Family Business Segment
Turning to our individual business segments, the Single-Family segment reported net income of $1.9 billion for the quarter, up $268 million, or 16 percent year-over-year.
Single-Family net revenues of $4.5 billion increased 6 percent from the prior year quarter. This increase was primarily driven by a 4 percent increase in our net interest income, which benefited from continued growth in our Single-Family mortgage portfolio. Investment net interest income also increased due to higher short-term interest rates. These increases were partially offset by lower deferred fee income due to slower prepayments as a result of higher mortgage rates.
Our provision for single-family credit losses was an expense of $120 million this quarter, primarily due to a modest credit reserve build for new acquisitions and the impact of higher mortgage rates. The provision in the prior year quarter was $318 million, which was primarily attributable to new acquisitions.
Our current house price forecast assumes an increase of 0.2 percent over the next 12 months and 0.6 percent over the subsequent 12 months. This is down from our forecast at end of last quarter which assumed 2.8 percent and 2 percent growth over next 12 and subsequent 12 months, respectively.
The Single-Family allowance for credit losses coverage ratio at the end of this quarter was 20 basis points, unchanged from the last quarter and down 6 basis points year over year.
The Single-Family serious delinquency rate continued to be historically low and declined to 52 basis points at the end of the first quarter, down 10 basis points from 1Q 2023 and 3 basis points from 4Q 2023. In the first quarter, we helped approximately 21,000 families remain in their homes through loan workouts.
Our Single-Family mortgage portfolio at the end of the quarter was $3.0 trillion, up 2 percent year over year. Credit characteristics of our Single-Family portfolio remained strong, with the weighted average current loan-to-value ratio at 52 percent and the weighted average current credit score at 754. At the end of the quarter, 61 percent of our single-family portfolio had some form of credit enhancement.
New business activity totaled $62 billion this quarter, slightly up from $59 billion from 1Q 2023. First time home buyers represented 52 percent of our total new business activity.
Higher mortgage rates continue to impact both purchase and refinance activity. Refinance activity accounted for 15 percent of our total new business activity this quarter which was slightly up from 11 percent in 4Q 2023. Mortgage rates at the end of the quarter were 6.79 percent, up from 6.61 percent at end 4Q 2023 and 6.32 percent at end 1Q 2023.
The weighted average original loan-to-value on new purchases was 78 percent and weighted average original credit score was 753, while the average estimated guarantee fee charged on the new business was 55 basis points.
Multifamily Business Segment
Moving on to Multifamily, the segment reported net income of $821 million, up $503 million from the prior year quarter. This increase was primarily driven by higher non-interest income of $1 billion, which increased $593 million from the prior year quarter. This increase in non-interest income was primarily driven by net gains from interest-rate risk management activities, higher revenues from held-for-sale loan purchase and securitization activities, and favorable fair value changes from spreads.
Net interest income of $271 million was up 32 percent year-over-year, primarily driven by higher yields on mortgage loans as a result of higher interest rates and the larger average PC portfolio.
The Multifamily provision for credit losses was an expense of $61 million this quarter versus $77 million in the prior year quarter.
Our Multifamily new business activity was $9 billion for the first quarter, up $3 billion or 50 percent from a year ago. Our Multifamily business provided financing for 85,000 multifamily rental units this quarter, of which 61 percent were affordable to low-income families.
The Multifamily mortgage portfolio increased 4 percent year-over-year to $443 billion. Approximately 94 percent of the Multifamily mortgage portfolio was covered by credit enhancements at the end of this quarter.
The Multifamily delinquency rate at end of the quarter was 34 basis points, up 21 basis points versus 13 basis points at the end of March 2023. This increase was primarily driven by delinquency in our floating rate loans and small business loans portfolio. Ninety-four percent of these delinquent loans had credit enhancement coverage.
Capital
On the capital front, our net worth increased to $50.5 billion at the end of the quarter, representing a 29 percent increase year-over-year.
Conclusion
In conclusion, Freddie Mac helped 279,000 families purchase, refinance, or rent a home while delivering solid financial results this quarter. Importantly, most of the liquidity we provided supported low- and moderate-income households, as well as first-time homebuyers. As affordability challenges are expected to persist, efforts to expand affordability for homeowners and renters will remain a key focus of Freddie Mac.
navycmdr
2 days ago
Freddie Mac Delivers 2024 Equitable Housing Finance Plan
Update to three-year Plan continues progress on equitable and sustainable housing
April 29, 2024 2:15 PM EDT
MCLEAN, Va., April 29, 2024 (GLOBE NEWSWIRE) -- Freddie Mac (OTCQB: FMCC) today published its Equitable Housing Finance Plan and Performance Report for 2023 along with revisions to its 2024 objectives and actions within its three-year Equitable Housing Finance Plan. The Plan is the company’s roadmap to promote sustainable homeownership and rental opportunities for traditionally underserved communities across the nation. Since 2022, Freddie Mac has helped more than 764,000 minority borrowers purchase or refinance a home, accounting for approximately 33 percent of the company’s Single-Family acquisitions.
“Our Equitable Housing Finance Plan is an important component of Freddie Mac’s mission-driven efforts to expand homeownership and improve outcomes for underserved families,” said Pam Perry, Single-Family Vice President of Equitable Housing at Freddie Mac. “In our Single-Family business, our Plan builds on the initiatives that are proven to work – down payment assistance, Special Purpose Credit Programs and consumer education, among other initiatives. While there is more work to be done, we are making steady progress.”
“Freddie Mac’s multifamily efforts are focused on creating and preserving affordable rental housing, driving meaningful advancements for renters and building a more diverse and equitable multifamily finance industry,” said Corey Aber, Multifamily Vice President of Mission, Policy & Strategy at Freddie Mac. “Through this work, we are helping address supply and affordability challenges that acutely impact underserved communities, as well as advance resident-centered practices and increase opportunities for diverse and emerging borrowers and lenders.”
The company today also published a progress report highlighting its accomplishments against the 2023 Plan.
Updates found within this year’s Plan include the following:
Expanding Access to Down Payment Assistance to help first-time homebuyers. In 2023, Freddie Mac launched DPA One®, a free, one-stop shop that helps lenders and loan officers quickly find and match borrowers to down payment assistance programs nationwide. Since its release, over 3,600 loan officers have registered for DPA One, which includes nearly 700 DPA programs covering 49 states and the District of Columbia. Throughout 2024, Freddie Mac will continue to enhance the tool and promote DPA One to industry partners focusing on underserved communities.
Using Special Purpose Credit Programs (SPCP) to make homeownership possible for underserved communities. Under the Plan, Freddie Mac will continue purchasing loans originated through both lender SPCPs and its own SPCP, BorrowSmart AccessSM. BorrowSmart Access provides down payment assistance and financial education to eligible families. In 2023, Freddie Mac purchased more than 9,300 SPCP loans, the majority of which supported homeownership for families of color. In its new Plan, the company committed to purchasing another 10,000 loans originated in 2024.
Expanding initiatives to help renters build credit and achieve homeownership. The company is doing this in two ways: establishing and improving credit scores and considering a history of on-time rent payments in loan purchase decisions. To date, approximately 500,000 renters have enrolled in Freddie Mac’s renter credit building initiative, with more than 300,000 of them increasing their credit score and more than 55,000 participants establishing credit scores for the first time. In 2024, the company will continue to expand this initiative to additional multifamily properties, with a goal of making on-time rent reporting an industry standard.
Freddie Mac also took steps to expand access to credit for historically underserved borrowers by using alternative credit data — including rent payment history — as part of the company’s loan purchase decisions. The company will continue this work in 2024 by exploring additional product enhancements and continuing outreach to borrowers and lenders to increase awareness and increase lender adoption of our digital tools.
Expanding Opportunities for Diverse and Emerging Lenders and Market Participants. To increase diversity across housing finance, Freddie Mac Multifamily launched an emerging correspondent program to help small financial institutions access Freddie Mac capital, including minority depository institutions and Community Development Financial Institutions. In 2023, the company set a new requirement for multifamily lenders to execute at least one correspondent agreement.
To increase opportunities for diverse and emerging multifamily borrowers, Freddie Mac is bridging the relationship and information gaps that can hold emerging industry players back as they seek to grow and access capital. Through a cohort of Diverse and Emerging Sponsors, Freddie Mac Multifamily helps build connections to expand the industry, create relationships and impact the market for years to come.
The company also expanded its Develop the DeveloperSM Academy, a program designed to increase the number of woman and minority-owned developers in underserved areas. In 2023, Freddie Mac trained more than 119 developers who account for 197 new single-family units and 485 new multifamily units currently in development.
Supporting the creation, preservation and rehabilitation of affordable housing by further expanding its use of multifamily Forward Commitments, which are commitments to provide permanent financing for new rental units or substantial rehabilitation of a multifamily property. In 2023, the company committed to funding more than 22,000 units through Forward Commitments, exceeding its goal for the year. In 2024, Freddie Mac will fund an additional 20,000 units through Forward Commitments.
Freddie Mac is also committed to preserving rent levels by providing incentives for multifamily borrowers in exchange for a commitment in the loan agreement to keep rents for a percentage of units affordable over time. This is critically important for working families to ensure rents remain predictable and affordable. In 2023, the company exceeded its goal for preservation with more than 3,200 units. In year three of the Plan, the company has committed to preserving rents for an additional 5,000 units.
To help maintain existing stock of affordable rental housing, Freddie Mac is using its multifamily loan offerings to support the rehabilitation of affordable and workforce rental housing. The company exceeded its goal of 10,000 rehabilitated units and has committed to funding an additional 10,000 units in the 2024 Plan.
Educating the industry and consumers by providing outreach, resources and research to expand housing opportunities, particularly for diverse homebuyers. Efforts in 2023 resulted in more than 500,000 consumers being reached through education and counseling, 70% of whom self-identified as people of color. The company also launched the new Spanish-language version of CreditSmart® Essentials, its comprehensive financial capability curriculum for consumers.
Freddie Mac’s Equitable Housing Finance Plan includes a series of actions to advance equity in both the single-family and multifamily housing markets. The ambitious set of initiatives focuses on five core areas: addressing the homeownership gap, strengthening investment within formerly redlined areas, financing the creation and preservation of affordable housing, increasing opportunities for renters and helping to eliminate disparities among underserved communities. The Plan sets goals, outlines actions to achieve those goals and includes an annual progress report.
For additional information, read the 2024 Plan, 2023 Progress Report, and the company’s fact sheet. Learn more about Freddie Mac’s diversity, equity and inclusion efforts.
About Freddie Mac
Freddie Mac’s mission is to make home possible for families across the nation. We promote liquidity, stability, affordability and equity in the housing market throughout all economic cycles. Since 1970, we have helped tens of millions of families buy, rent or keep their home. Learn More: Website | Consumers | Twitter | LinkedIn | Facebook | Instagram | YouTube
MEDIA CONTACT:
Chad Wandler
703-903-2446
Chad_Wandler@FreddieMac.com
navycmdr
2 days ago
FHFA Announces Release of Fair Lending Final Rule
Enterprise Equitable Housing Finance Plan Updates are also published
FOR IMMEDIATE RELEASE - 4/29/2024
Washington, D.C. – The Federal Housing Finance Agency (FHFA) today released its Fair Lending, Fair Housing, and Equitable Housing Finance Plans Final Rule, together with Fannie Mae and Freddie Mac’s (the Enterprises) Equitable Housing Finance Plan updates for 2024 and Performance Reports for 2023.
The final rule codifies in regulation FHFA’s fair lending oversight requirements for the Enterprises and the Federal Home Loan Banks; the Enterprises’ Equitable Housing Finance Plans (Plans); collection of homeownership education, housing counseling, and language preference information from the Supplemental Consumer Information Form (SCIF); and new Federal Home Loan Bank reporting requirements.
Since the release of their Plans in June 2022, the Enterprises have made significant progress towards ensuring all borrowers and renters have access to fair, sustainable, and equitable housing opportunities. The Enterprises have served close to 2.6 million families under the Plans by educating consumers, reducing closing costs, introducing innovation into underwriting, and combating appraisal bias. The Enterprises also propose new actions for 2024, including a focus on promoting homeownership for first-generation homebuyers.
“As we reflect on the significance of Fair Housing Month, FHFA and its regulated entities will continue to address barriers that make affordable housing difficult to find,” said FHFA Director Sandra L. Thompson. “These initiatives are critically important at a time when housing affordability remains a persistent challenge.”
FHFA will seek public feedback to inform the next three-year Plans through a Request for Input and listening session. FHFA expects to hold a public listening session in June 2024, and anticipates releasing the next Plans in January 2025.
Louie_Louie
6 days ago
Seems there are far fewer posters on the FNMA board🤔, Nothing but mostly antagonists with a few good guys. Being done by design, no doubt. I hope the riff-raff stays off of this board, but rats tend to follow in packs.
No release will be done by this administration, their plate is overflowing with dumpster fires, election fixing, Dimetnia back covering, media avoidance, Free-be give aways and the court cases challenging that , and then there's that nasty inflation and illegals they seem to not understand how to control by stopping needless spending (give aways) and closing a border. So lots of SNAFU's and nobodies home in the White House. I think we (the GSE's) are safe until the next administration, then, if the cards fall right, we could finally make head way out of this nightmare.
JMHO & GLTA
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