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Freddie Mac 2Q Earnings Down 33% From Last Year

David Krechevsky
Jul 28, 2022
Freddie Mac logo 1200p

CEO calls results 'solid,' says GSE has built enough equity to withstand 'potential economic stress.'

The Federal Home Loan Mortgage Corp., or Freddie Mac, today reported that its net income declined 33% in the second quarter from a year earlier, driven primarily by a provision for credit losses compared to a benefit for credit losses in the prior quarter.

Freddie Mac reported net income of $2.5 billion for the second quarter, down 33% from $3.7 billion in the second quarter last year and down 35% from $3.8 billion in the first quarter of this year.

Net revenues totaled $5.4 billion, down 7.9% from $5.87 billion a year earlier and down 7.6% from $5.85 billion in the first quarter of this year, primarily driven by a decline in non-interest income in its Multifamily segment.

Net interest income was $4.8 billion, down less than 1% year over year, as continued mortgage portfolio growth and higher average portfolio guarantee fee rates were offset by lower deferred fee income, which was driven by slower prepayments as a result of higher mortgage interest rates, Freddie Mac said.

Non-interest income decreased 41% year-over year to $6 million, primarily driven by lower guarantee income and a decrease in net investment gains in Multifamily.

Overall, the government-sponsored enterprise financed 468,000 mortgages in the quarter, including 263,000 purchase loans, with 61% of eligible loans being affordable to low- to moderate-income families. Of the mortgages, 113,000 were first-time homebuyers.

Freddie Mac also financed 149,000 rental units, with 97% of eligible units being affordable to low- to moderate-income families.

In the Single-Family segment, new business activity totaled $138 billion, down 52% year-over-year, as refinance activity slowed significantly due to rising mortgage interest rates, it said. For the Multifamily segment, new business activity totaled $15 billion, up 15% year-over-year.

Freddie Mac’s Single-Family mortgage portfolio was $2.9 trillion in the quarter, up 14% year-over-year, driven by an increase in average portfolio loan size and a higher share of the overall market, the enterprise said. Its Multifamily mortgage portfolio was $415 billion, up 4% year-over-year, driven by ongoing loan purchase and securitization activity, it said.

Michael DeVito, Freddie Mac CEO

Freddie Mac CEO Michael J. DeVito called the enterprise’s second-quarter results “solid,” and said it has built enough equity to withstand “potential economic stress.”

“We helped 617,000 families buy, refinance, or rent a home, and introduced innovations which allow lenders to simplify the loan underwriting process and improve risk management,” he said. “As rising mortgage rates, house-price appreciation, and other economic factors challenge affordability, we are committed to working across the industry to promote equity and sustainable housing nationwide.”

Other highlights include:

Single-family: 

  • The serious delinquency rate was 0.76%, down from 0.92% as of March 31, 2022, and 1.86% as of June 30, 2021, driven by the decline of loans in forbearance.
  • Completed approximately 37,000 loan workouts.

Multifamily:

  • Delinquency rate of 0.07%, down from 0.08% as of March 31, 2022, and 0.15% as of June 30, 2021.
  • 96% of mortgage portfolio covered by credit enhancements
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