May 14, 2022

Freddie Mac reports quarterly decline in loan purchases and earnings

New single-family loan purchases at Freddie Mac hit a new high in 2021, the second of two record years for the mortgage industry.

“Total single family and new business activity rose 12% to a record $1.2 trillion, reflecting a 32% increase in home purchase loans and a 3 % of refinancing loans,” CEO Michael DeVito said on a Feb. 10 earnings call.

However, for the last quarter of the year, creations fell. Purchases of loans from a family by Freddie totaled $271 billion, compared to $299 billion in the third quarter of last year and $383 billion in the fourth quarter of 2020. Of this amount, $111 billion were purchase loans, down from a record $131.2. billion in the previous quarter, and $109 billion a year earlier.

Overall, Freddie reported net income of $2.7 billion versus $2.9 billion in the third two quarter and quarter one year earlier. Only comprehensive income, an equity-based measure used in calculations related to Freddie’s conservatorship deals, was higher than a year ago. In the fourth quarter of last year, Freddie’s overall profit was $2.5 billion. In other quarters, the calculation of comprehensive income was the same as the net.

“The decline in net profit was primarily due to a credit charge this quarter, compared to a release of reserves in the fourth quarter of 2020,” Chief Financial Officer Chris Lown said on the earnings call.

While long-term delinquencies continued to decline during the quarter, those with shorter-term delinquencies plateaued or increased slightly, likely reflecting the spread of the omicron variant.

The rate at which loans in this market became seriously delinquent fell to 1.12%, from 1.46% in the third quarter of last year and 2.64% in the last three months of 2020. In contrast , the monthly delinquency rate fell to 0.81%. 0.76% in the prior year and 1.01% in the fourth quarter of 2020. Mortgages with two months overdue payments had a delinquency rate of 020% which was consistent with the third quarter of 2021, and was down from 0.38% a year earlier.

Forbearance plans on single-family loans fell to around 16,000 from 21,000 in the prior quarter and 52,000 in the fourth quarter of 2020. Deferrals, in which borrowers push suspended forbearance payments for pandemic-related hardship until the end of their loans, also fell, slipping to 39,000 from 45,000 in the third quarter of 2021 and 74,000 a year earlier. Other workouts, a category that includes modified loan terms to account for income changes and foreclosure alternatives, held steady at around 7,000 for the most recent quarter and comparable periods.

Despite a small percentage of Freddie’s loans being restructured due to new or ongoing pandemic distress, its net income rose to $5.6 billion from $5.2 billion. billion in the third quarter of 2021 and $5 billion a year earlier. Net interest income, which was a key driver of revenue, was $4.8 billion, up from $4.4 billion in the prior quarter and $12.8 billion in the fourth quarter of 2020. Single-family business accounted for the lion’s share or $4.7 billion of net revenue, with the balance coming from Freddie’s multi-family business.

“Overall, we had strong performances in both of our businesses, which contributed significantly to our capital position,” DeVito said.

It gives Freddie “a good start” in his efforts to improve his capital position in a new framework that raises the bar. More needs to be done and plans to issue a record number of transfer transactions in 2022 will be key to that end, DeVito added. .

Maintaining strong earnings will be too, said Freddie’s CEO.

“We remain undercapitalized and our path to a stronger capital position is through strong and consistent financial performance. To achieve this performance, we must demonstrate relentless focus on all aspects of our business,” said DeVito.