OTCMKTS:FMCC Federal Home Loan Mortgage Q2 2023 Earnings Report $5.20 +0.07 (+1.36%) As of 03:59 PM Eastern Earnings HistoryForecast Federal Home Loan Mortgage EPS ResultsActual EPS$0.02Consensus EPS N/ABeat/MissN/AOne Year Ago EPSN/AFederal Home Loan Mortgage Revenue ResultsActual Revenue$5.34 billionExpected RevenueN/ABeat/MissN/AYoY Revenue GrowthN/AFederal Home Loan Mortgage Announcement DetailsQuarterQ2 2023Date8/2/2023TimeN/AConference Call DateWednesday, August 2, 2023Conference Call Time9:00AM ETConference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Quarterly Report (10-Q)Earnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by Federal Home Loan Mortgage Q2 2023 Earnings Call TranscriptProvided by QuartrAugust 2, 2023 ShareLink copied to clipboard.There are 3 speakers on the call. Operator00:00:00Good morning and thank you for joining us for a presentation of Freddie Mac's Second Quarter 2023 Financial Results. I'm Jeff Markowitz, Deputy CAO and SVP of External Affairs and Corporate Communications. We're joined today by our CEO, Michael DeVito and by our CFO, Chris Lown. Before we begin, we'd like to point out that during the call, Mr. DeVito and Mr. Operator00:00:21Lown may make forward looking statements based on assumptions about the company's key business drivers and other factors. Changes in these factors could cause the company's actual results to materially vary from its expectations. A description of these factors can be found in the company's quarterly report on 10 Q filed today. You'll find the 10 Q earnings press release and related materials posted on the Investor Relations section of freddiemac.com. This call is recorded and a replay will soon be available on freddiemac.com. Operator00:00:49We ask that the call not be rebroadcast or transcribed. With that, I'll turn the call over to Freddie Mac's CEO, Michael DeVito. Speaker 100:00:58Good morning and thank you for joining our Q2 call to review financial results. Today, I'd like to cover 3 topics. Ongoing challenges in the housing market, our efforts to tackle those challenges and fulfill our mission, And the results we delivered in the Q2 for homebuyers and renters. Let me begin with the housing market, which continues to challenge borrowers and renters. 2 years ago, the average 30 year fixed rate was near a historic low at 2.77%. Speaker 100:01:30Today, it's closer to 7%, representing the fastest increase in over 40 years. The nearly 6 in 10 borrowers Who bought or refinanced when rates were low are understandably reluctant to give up that rate. They may want to move, but they're not selling. This has consequences throughout the housing market. First, it is exacerbating a supply shortage. Speaker 100:01:56Existing homes for sale are near record lows and June listings were down nearly 41% compared to pre pandemic averages. 2nd, it is challenging affordability for many families. Rising rates briefly reduced house prices, But low supply and high demand drove them even higher in many markets. In fact, according to the National Association of Realtors, Median existing home sale prices in June were the 2nd highest ever recorded. In the multifamily space, Owner operators continue to navigate rising mortgage rates that are contributing to downward pressure on apartment values across the nation. Speaker 100:02:38This is driving up the cost of financing properties, which has slowed multifamily origination volume. Unfortunately, renters continue to bear the brunt of these dynamics as rents reached an all time high in the second quarter. Now let me turn to how Freddie Mac is working to tackle the related challenges of housing affordability and availability. Here are some noteworthy examples of our progress in the Q2. First, our single family business ramped up loan purchases under our BorrowSmart Access down payment assistance program. Speaker 100:03:14More than a dozen lenders already offer BorrowSmart access to first time homebuyers in disadvantaged neighborhoods of 10 major cities. 2nd, we introduced the Heritage 1 mortgage product To support homeownership among Native Americans, Heritage 1 provides educational resources, counseling and affordable financing options To Native Americans looking to purchase on tribal lands. 3rd, we launched our multifamily workforce housing preservation program. The program offers favorable financing terms to multifamily owner operators who agree to voluntarily keep a percentage of rental units At affordable levels. This program builds on our Tenant Advancement Commitment or TAC, which supports multifamily owner operators Looking to preserve affordable rents, provide social services and other resident centered housing features. Speaker 100:04:11We financed our first property under TAC in 2018 at Plant City Florida's Walden Lake Complex, Which features 3 52 garden style apartments. To this day, rents on half of those units remain affordable to families earning no more than 80% of the area median income. Since inception, Freddie Mac has completed 48 CAC transactions Like Walden Lake for nearly $1,500,000,000 and help preserve thousands of affordable units. Finally, we continue our work to address the national housing supply shortage. As I previously reported, our Develop the Developer program Helps close gaps in knowledge and critical skills for aspiring real estate developers. Speaker 100:04:57To date, More than 90 single and multifamily developers have graduated from the program, more than 80% of them from underrepresented communities. Now let's look at Freddie Mac's overall results. In the Q2, we helped 372,000 families buy, Refinance or rent a home. This was more than a 40% increase over the Q1. This includes 102,000 first time homebuyers, representing more than 51% of the owner occupied homes we helped finance. Speaker 100:05:32It is a historic high. Overall, we financed 258,000 single family mortgages and 114,000 rental units in the 2nd quarter With 55% of the single family mortgages and 90% of the rental units being affordable to low to moderate income families. By remaining focused on our commitment to help families find an affordable place to call home, we earned $2,900,000,000 in net income And we grew Freddie Mac's net worth to $42,000,000,000 The nearly $8,000,000,000 we have added via retained earnings since Q2 2022 Contributes to Freddie Mac's financial stability and our ability to serve our mission. For more on our financial performance, here is our CFO, Chris Lown. Speaker 200:06:22Thank you, Michael, and good morning. We earned net income of $2,900,000,000 this quarter, an increase of $491,000,000 Or 20% year over year. This increase was primarily driven by a credit reserve release in our single family business versus a credit reserve build in the prior year quarter. 2nd quarter net revenues were $5,300,000,000 a slight decrease of $65,000,000 year over year. This decline was driven by lower net interest income, which declined 5% year over year to $4,500,000,000 Primarily driven by lower deferred fee income recognition resulting from slower prepayments due to higher mortgage rates. Speaker 200:07:03The decline in revenues was partially offset by higher non interest income of $816,000,000 up 27% year over year, Primarily driven by higher guarantee income and investment gains in our multifamily business. An improvement in observed and forecasted house price appreciation $537,000,000 benefit for credit losses in the quarter versus an expense of $307,000,000 in the prior year quarter. In the Q2 of 2022, the provision for credit losses was driven by portfolio growth and deterioration in forecast economic conditions. Our total mortgage portfolio at the end of this quarter was $3,400,000,000,000 a 3% increase year over year. Turning to our individual business segments. Speaker 200:07:49The single family segment reported net income of $2,400,000,000 for the quarter, up 10% year over year. Single family net interest income of $4,300,000,000 was down 5% year over year, primarily driven by lower deferred fee income recognition As prepayments slowed down due to higher mortgage interest rates. Mortgage interest rates at the end of this quarter were 6.71%, Up 100 basis points from the prior year quarter and almost 40 basis points from the last quarter. Non interest income for single family was $65,000,000 this quarter, down $271,000,000 from the prior year quarter. This decline was primarily driven by changes in market spreads on mortgage Commitments. Speaker 200:08:34Our provision for single family credit losses this quarter was a benefit of $638,000,000 Primarily driven by improvements in observed and forecast house price appreciation. In the prior year quarter, we had a provision expense of $298,000,000 Which is primarily driven by portfolio growth and deterioration in forecasted economic conditions. House prices increased by 2.1% this quarter And our forecast assumes an increase of 0.8% over the next 12 months and 0.9% over the subsequent 12 months. The single family allowance for credit losses coverage ratio at the end of this quarter was 24 basis points, up from 17 basis points a year earlier. The single family serious delinquency rate continued to decline to 56 basis points at the end of the second quarter, down 20 basis points from 2Q 2022 And 6 basis points from 1Q 2023. Speaker 200:09:29In the Q2, we helped approximately 20,000 families remain in their homes through loan workouts. Our loan workouts have continued to decline as the seriously delinquent loan population has declined. Our single family mortgage portfolio increased 3% year over year to $3,000,000,000,000 at the end of this quarter. Credit characteristics of our single family portfolio remains strong With the weighted average current loan to value ratio at 54% and the weighted average current credit score at 756. At the end of the quarter, 62% of our single family portfolio had some form of credit enhancement. Speaker 200:10:06New business activity picked up versus the Q1 of 2023 and totaled $83,000,000,000 this quarter, an increase of $24,000,000,000 Or 41% versus last quarter. However, year over year, new business activity declined $55,000,000,000 or 40% As refinance activity declined substantially due to increased mortgage interest rates. Home purchase volume made up 88% of our total new business activity quarter compared to 62% in 2Q 2022. The average guarantee fee rate charged on new business was 57 basis points this quarter. Moving on to Multifamily, the segment reported net income of $563,000,000 or $278,000,000 from the prior year quarter. Speaker 200:10:53This increase was primarily driven by higher non interest income, which was partially offset by a higher provision for credit losses this period. Non interest income was $751,000,000 up $442,000,000 year over year, Driven by higher guarantee income and higher investment gains. On guaranty assets as a result of smaller interest rate increases. Net investment gains increased primarily due to fair value Gains from interest rate risk management activities specific to our guarantee assets and index lock agreements. The provision for credit losses in multifamily this quarter was $101,000,000 driven by a credit reserve build due to deterioration in forecasted multifamily market conditions And current loan performance. Speaker 200:11:42The multifamily allowance for credit losses coverage ratio at the end of this quarter was 50 basis points, up from 11 basis points a year earlier. The multifamily delinquency rate was 21 basis points at the end of the quarter, up from 13 basis points last quarter and 7 basis points at the end of June 2022. This change was primarily driven by an increase in delinquent loans in our seniors housing portfolio. 95% of these delinquent loans have credit enhancement coverage. Our multifamily new business activity was $13,000,000,000 for the 2nd quarter, down 13% from a year ago, As higher interest rates have reduced demand for multifamily mortgage financing, our multifamily mortgage portfolio increased by 3% year over year to $427,000,000,000 of which 94% was covered by credit enhancements. Speaker 200:12:32On the capital front, Our net worth increased to $42,000,000,000 at the end of the quarter, representing a 23% increase year over year. With that, I'll turn it back over to Michael. Speaker 100:12:43Thank you, Chris. The 2nd quarter saw single family home prices stabilize influenced by strong demand, Higher residential mortgage rates and limited homes for sale. Renters continue to be cost burden as rents rose in the face of Softening multifamily property prices. Freddie Mac remained focused on its mission and delivered a solid quarter, Helping 372,000 families buy, refinance or rent a home. The majority of them affordable to low or moderate income borrowers and renters. Speaker 100:13:17Our commitment to serving our mission remains our top priority.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallFederal Home Loan Mortgage Q2 202300:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckPress Release(8-K)Quarterly report(10-Q) Federal Home Loan Mortgage Earnings HeadlinesFederal Home Loan Mortgage Corp (FMCC) Q1 2025 Earnings Call Highlights: Strong Net Income Amid ...May 3 at 1:10 AM | finance.yahoo.comFreddie Mac Issues Monthly Volume Summary for March 2025May 1, 2025 | globenewswire.comThe Man I Turn to In Times Like ThisA storm is brewing in the markets: new tariffs, recession warnings, and panic in the headlines. That’s when publisher Brett Aitken turns to Whitney Tilson—a man CNBC once dubbed “The Prophet.” Tilson just released a new prediction that runs counter to what mainstream finance is telling you.May 5, 2025 | Stansberry Research (Ad)Mortgage Rates Continue to DeclineMay 1, 2025 | globenewswire.comFreddie Mac Announces First Quarter 2025 Financial ResultsMay 1, 2025 | globenewswire.comFreddie Mac Announces Release Date for First Quarter 2025 Financial ResultsApril 30, 2025 | globenewswire.comSee More Federal Home Loan Mortgage Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Federal Home Loan Mortgage? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Federal Home Loan Mortgage and other key companies, straight to your email. Email Address About Federal Home Loan MortgageFederal Home Loan Mortgage (OTCMKTS:FMCC) operates in the secondary mortgage market in the United States. It operates through two segments, Single-Family and Multifamily. The Single-Family segment purchases, securitizes, and guarantees single-family loans; and manages single-family mortgage credit and market risk, as well as manages mortgage-related investments portfolio, single-family securitization activities, and treasury functions. This segment serves mortgage banking companies, commercial banks, regional banks, community banks, credit unions, housing finance agencies, savings institutions, and non-depository financial institutions. The Multifamily segment engages in the purchase, securitization, and guarantee of multifamily loans; issuance of multifamily K certificates; manages multifamily mortgage credit and market risk; and invests in multifamily loans and mortgage-related securities. It serves banks and other financial institutions, insurance companies, money managers, hedge funds, pension funds, state and local governments, and broker dealers. Federal Home Loan Mortgage Corporation incorporated in 1970 and is headquartered in McLean, Virginia.View Federal Home Loan Mortgage ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Is Reddit Stock a Buy, Sell, or Hold After Earnings Release?Warning or Opportunity After Super Micro Computer's EarningsAmazon Earnings: 2 Reasons to Love It, 1 Reason to Be CautiousRocket Lab Braces for Q1 Earnings Amid Soaring ExpectationsMeta Takes A Bow With Q1 Earnings - Watch For Tariff Impact in Q2Palantir Earnings: 1 Bullish Signal and 1 Area of ConcernVisa Q2 Earnings Top Forecasts, Adds $30B Buyback Plan Upcoming Earnings American Electric Power (5/6/2025)Advanced Micro Devices (5/6/2025)Marriott International (5/6/2025)Constellation Energy (5/6/2025)Arista Networks (5/6/2025)Brookfield Asset Management (5/6/2025)Duke Energy (5/6/2025)Energy Transfer (5/6/2025)Mplx (5/6/2025)Ferrari (5/6/2025) Get 30 Days of MarketBeat All Access for Free Sign up for MarketBeat All Access to gain access to MarketBeat's full suite of research tools. 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There are 3 speakers on the call. Operator00:00:00Good morning and thank you for joining us for a presentation of Freddie Mac's Second Quarter 2023 Financial Results. I'm Jeff Markowitz, Deputy CAO and SVP of External Affairs and Corporate Communications. We're joined today by our CEO, Michael DeVito and by our CFO, Chris Lown. Before we begin, we'd like to point out that during the call, Mr. DeVito and Mr. Operator00:00:21Lown may make forward looking statements based on assumptions about the company's key business drivers and other factors. Changes in these factors could cause the company's actual results to materially vary from its expectations. A description of these factors can be found in the company's quarterly report on 10 Q filed today. You'll find the 10 Q earnings press release and related materials posted on the Investor Relations section of freddiemac.com. This call is recorded and a replay will soon be available on freddiemac.com. Operator00:00:49We ask that the call not be rebroadcast or transcribed. With that, I'll turn the call over to Freddie Mac's CEO, Michael DeVito. Speaker 100:00:58Good morning and thank you for joining our Q2 call to review financial results. Today, I'd like to cover 3 topics. Ongoing challenges in the housing market, our efforts to tackle those challenges and fulfill our mission, And the results we delivered in the Q2 for homebuyers and renters. Let me begin with the housing market, which continues to challenge borrowers and renters. 2 years ago, the average 30 year fixed rate was near a historic low at 2.77%. Speaker 100:01:30Today, it's closer to 7%, representing the fastest increase in over 40 years. The nearly 6 in 10 borrowers Who bought or refinanced when rates were low are understandably reluctant to give up that rate. They may want to move, but they're not selling. This has consequences throughout the housing market. First, it is exacerbating a supply shortage. Speaker 100:01:56Existing homes for sale are near record lows and June listings were down nearly 41% compared to pre pandemic averages. 2nd, it is challenging affordability for many families. Rising rates briefly reduced house prices, But low supply and high demand drove them even higher in many markets. In fact, according to the National Association of Realtors, Median existing home sale prices in June were the 2nd highest ever recorded. In the multifamily space, Owner operators continue to navigate rising mortgage rates that are contributing to downward pressure on apartment values across the nation. Speaker 100:02:38This is driving up the cost of financing properties, which has slowed multifamily origination volume. Unfortunately, renters continue to bear the brunt of these dynamics as rents reached an all time high in the second quarter. Now let me turn to how Freddie Mac is working to tackle the related challenges of housing affordability and availability. Here are some noteworthy examples of our progress in the Q2. First, our single family business ramped up loan purchases under our BorrowSmart Access down payment assistance program. Speaker 100:03:14More than a dozen lenders already offer BorrowSmart access to first time homebuyers in disadvantaged neighborhoods of 10 major cities. 2nd, we introduced the Heritage 1 mortgage product To support homeownership among Native Americans, Heritage 1 provides educational resources, counseling and affordable financing options To Native Americans looking to purchase on tribal lands. 3rd, we launched our multifamily workforce housing preservation program. The program offers favorable financing terms to multifamily owner operators who agree to voluntarily keep a percentage of rental units At affordable levels. This program builds on our Tenant Advancement Commitment or TAC, which supports multifamily owner operators Looking to preserve affordable rents, provide social services and other resident centered housing features. Speaker 100:04:11We financed our first property under TAC in 2018 at Plant City Florida's Walden Lake Complex, Which features 3 52 garden style apartments. To this day, rents on half of those units remain affordable to families earning no more than 80% of the area median income. Since inception, Freddie Mac has completed 48 CAC transactions Like Walden Lake for nearly $1,500,000,000 and help preserve thousands of affordable units. Finally, we continue our work to address the national housing supply shortage. As I previously reported, our Develop the Developer program Helps close gaps in knowledge and critical skills for aspiring real estate developers. Speaker 100:04:57To date, More than 90 single and multifamily developers have graduated from the program, more than 80% of them from underrepresented communities. Now let's look at Freddie Mac's overall results. In the Q2, we helped 372,000 families buy, Refinance or rent a home. This was more than a 40% increase over the Q1. This includes 102,000 first time homebuyers, representing more than 51% of the owner occupied homes we helped finance. Speaker 100:05:32It is a historic high. Overall, we financed 258,000 single family mortgages and 114,000 rental units in the 2nd quarter With 55% of the single family mortgages and 90% of the rental units being affordable to low to moderate income families. By remaining focused on our commitment to help families find an affordable place to call home, we earned $2,900,000,000 in net income And we grew Freddie Mac's net worth to $42,000,000,000 The nearly $8,000,000,000 we have added via retained earnings since Q2 2022 Contributes to Freddie Mac's financial stability and our ability to serve our mission. For more on our financial performance, here is our CFO, Chris Lown. Speaker 200:06:22Thank you, Michael, and good morning. We earned net income of $2,900,000,000 this quarter, an increase of $491,000,000 Or 20% year over year. This increase was primarily driven by a credit reserve release in our single family business versus a credit reserve build in the prior year quarter. 2nd quarter net revenues were $5,300,000,000 a slight decrease of $65,000,000 year over year. This decline was driven by lower net interest income, which declined 5% year over year to $4,500,000,000 Primarily driven by lower deferred fee income recognition resulting from slower prepayments due to higher mortgage rates. Speaker 200:07:03The decline in revenues was partially offset by higher non interest income of $816,000,000 up 27% year over year, Primarily driven by higher guarantee income and investment gains in our multifamily business. An improvement in observed and forecasted house price appreciation $537,000,000 benefit for credit losses in the quarter versus an expense of $307,000,000 in the prior year quarter. In the Q2 of 2022, the provision for credit losses was driven by portfolio growth and deterioration in forecast economic conditions. Our total mortgage portfolio at the end of this quarter was $3,400,000,000,000 a 3% increase year over year. Turning to our individual business segments. Speaker 200:07:49The single family segment reported net income of $2,400,000,000 for the quarter, up 10% year over year. Single family net interest income of $4,300,000,000 was down 5% year over year, primarily driven by lower deferred fee income recognition As prepayments slowed down due to higher mortgage interest rates. Mortgage interest rates at the end of this quarter were 6.71%, Up 100 basis points from the prior year quarter and almost 40 basis points from the last quarter. Non interest income for single family was $65,000,000 this quarter, down $271,000,000 from the prior year quarter. This decline was primarily driven by changes in market spreads on mortgage Commitments. Speaker 200:08:34Our provision for single family credit losses this quarter was a benefit of $638,000,000 Primarily driven by improvements in observed and forecast house price appreciation. In the prior year quarter, we had a provision expense of $298,000,000 Which is primarily driven by portfolio growth and deterioration in forecasted economic conditions. House prices increased by 2.1% this quarter And our forecast assumes an increase of 0.8% over the next 12 months and 0.9% over the subsequent 12 months. The single family allowance for credit losses coverage ratio at the end of this quarter was 24 basis points, up from 17 basis points a year earlier. The single family serious delinquency rate continued to decline to 56 basis points at the end of the second quarter, down 20 basis points from 2Q 2022 And 6 basis points from 1Q 2023. Speaker 200:09:29In the Q2, we helped approximately 20,000 families remain in their homes through loan workouts. Our loan workouts have continued to decline as the seriously delinquent loan population has declined. Our single family mortgage portfolio increased 3% year over year to $3,000,000,000,000 at the end of this quarter. Credit characteristics of our single family portfolio remains strong With the weighted average current loan to value ratio at 54% and the weighted average current credit score at 756. At the end of the quarter, 62% of our single family portfolio had some form of credit enhancement. Speaker 200:10:06New business activity picked up versus the Q1 of 2023 and totaled $83,000,000,000 this quarter, an increase of $24,000,000,000 Or 41% versus last quarter. However, year over year, new business activity declined $55,000,000,000 or 40% As refinance activity declined substantially due to increased mortgage interest rates. Home purchase volume made up 88% of our total new business activity quarter compared to 62% in 2Q 2022. The average guarantee fee rate charged on new business was 57 basis points this quarter. Moving on to Multifamily, the segment reported net income of $563,000,000 or $278,000,000 from the prior year quarter. Speaker 200:10:53This increase was primarily driven by higher non interest income, which was partially offset by a higher provision for credit losses this period. Non interest income was $751,000,000 up $442,000,000 year over year, Driven by higher guarantee income and higher investment gains. On guaranty assets as a result of smaller interest rate increases. Net investment gains increased primarily due to fair value Gains from interest rate risk management activities specific to our guarantee assets and index lock agreements. The provision for credit losses in multifamily this quarter was $101,000,000 driven by a credit reserve build due to deterioration in forecasted multifamily market conditions And current loan performance. Speaker 200:11:42The multifamily allowance for credit losses coverage ratio at the end of this quarter was 50 basis points, up from 11 basis points a year earlier. The multifamily delinquency rate was 21 basis points at the end of the quarter, up from 13 basis points last quarter and 7 basis points at the end of June 2022. This change was primarily driven by an increase in delinquent loans in our seniors housing portfolio. 95% of these delinquent loans have credit enhancement coverage. Our multifamily new business activity was $13,000,000,000 for the 2nd quarter, down 13% from a year ago, As higher interest rates have reduced demand for multifamily mortgage financing, our multifamily mortgage portfolio increased by 3% year over year to $427,000,000,000 of which 94% was covered by credit enhancements. Speaker 200:12:32On the capital front, Our net worth increased to $42,000,000,000 at the end of the quarter, representing a 23% increase year over year. With that, I'll turn it back over to Michael. Speaker 100:12:43Thank you, Chris. The 2nd quarter saw single family home prices stabilize influenced by strong demand, Higher residential mortgage rates and limited homes for sale. Renters continue to be cost burden as rents rose in the face of Softening multifamily property prices. Freddie Mac remained focused on its mission and delivered a solid quarter, Helping 372,000 families buy, refinance or rent a home. The majority of them affordable to low or moderate income borrowers and renters. Speaker 100:13:17Our commitment to serving our mission remains our top priority.Read morePowered by