Freddie Mac now worth $31.7B, but G-fee income falls

According to filings, GSE's single-family mortgage portfolio now stands at $1.9 trillion

Freddie Mac reported net income of $3.8 billion for the first quarter of 2022, an increase of 37% year-over-year, even as purchase and refinance activity continued to decline.

The company’s net worth climbed to $31.7 billion, up nearly $13 billion from the same time last year. Its single-family mortgage portfolio now stands at $1.9 trillion, a year-over-year increase of 17%, due to house price appreciation and strong home purchase activity. 

“Freddie Mac delivered a strong first quarter performance, with net income exceeding both the first and fourth quarters of 2021,” said Freddie Mac CEO Michael DeVito. “We remain intensely focused on our expansive mission, with an emphasis on promoting greater equity and sustainability.”

Income from guarantee fees was down considerably from the fourth quarter. In the first quarter of 2022, Freddie Mac pulled in just $70 million in guarantee income, a year-over-year decrease of $180 million. That decrease was more than offset, though, with gains from investments totalling $1.5 billion  – an increase of nearly 300% from the previous quarter.

Single-family net income totaled $3.4 billion, an increase of $1.2 billion from the prior quarter and $1.7 billion more than the same time last year. That increase was due to higher net interest income from mortgage portfolio growth, higher average portfolio guarantee fee rates and higher net investment gains.

Single-family net income was also bolstered by house price appreciation and higher forecasted house prices, which led to a higher benefit for credit losses, the company said.

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The average loan amount for single-family home purchase loans Freddie Mac backed in the first quarter reached $300,000, due to a higher conforming loan limit and house price appreciation, the company’s filings show. The average weighted credit score for all loans Freddie Mac purchased or guaranteed in the first quarter was 746, less than its five-year high of 760, the average credit score for loans it backed in 2020.

The volume of refinances backed by Freddie Mac was less than half the level of refinances a year ago. In the first quarter of 2022, Freddie Mac backed $114 billion in refinances, less than half the $273 billion in refinances it reported in the first quarter of 2021. Purchase volume for the first quarter, at $93 billion, was down slightly from the prior quarter’s purchase volume of $111 billion.

Freddie Mac said that some of that slippage was due to a decrease in its share of the overall government-sponsored enterprise market.

“Our loan purchase and guarantee activity decreased primarily due to a decrease in refinance volume, driven by an increase in mortgage interest rates, and a decrease in our share of the GSE volume,” the company said in its filingsquarterly report.

Nearly half of new single-family home purchase loans backed by Freddie Mac in the first quarter were for first-time homebuyers.

Although not mentioned in Freddie Mac’s first quarter results, the previous day the FHFA released Fannie Mae and Freddie Mac’s duty to serve underserved markets plans. Freddie Mac’s plan included a numerical target for manufactured housing chattel loan purchases by 2024, although the company does not yet have a product to conduct those purchases, and implementing one would require approval from its conservator.

In a statement, Mike Hutchins, president of Freddie Mac, called the plan “comprehensive and sustainable.”

“We welcome the opportunity to do more,” Hutchins said.

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