Freddie Mac Reports Net Income of $2.8 Billion and
Comprehensive Income of $2.4 Billion for First Quarter 2021
Providing Stability to the Housing Market While Serving Freddie Mac's Affordable Housing Mission
- Continued to provide mortgage-relief options for borrowers affected by the COVID-19 pandemic, including forbearance programs for both single-family and multifamily borrowers.
- Extended moratorium on foreclosures and evictions until at least June 30, 2021.
- Extended temporary measures designed to provide flexibility to homeowners, lenders, and appraisers to expedite loan closings during the pandemic.
First Quarter 2021 Financial Results
Market Liquidity | Homes and Rental Units | Net Worth - | Total Mortgage | |||
Provided - | Financed - | Portfolio - | ||||
$377 Billion | 1.4 Million | $18.8 Billion | $2.9 Trillion | |||
Consolidated
Net Revenues
$5.3 Billion
Net Income
$2.8 Billion
Comprehensive
Income
$2.4 Billion
Single-Family
Net Revenues
$3.8 Billion
Net Income
$1.7 Billion
Comprehensive
Income
$1.4 Billion
Multifamily
Net Revenues
$1.4 Billion
Net Income
$1.0 Billion
Comprehensive
Income
$1.0 Billion
- Net income up $2.6 billion year-over-year, driven by mortgage portfolio growth, higher deferred fee income recognition, higher revenues from Multifamily loan purchase and securitization activities, and lower credit-related expense
- Benefit for credit losses of $0.2 billion, reflecting a credit reserve release driven by improving economic conditions
- New business activity of $362 billion, up 162% year-over- year, reflecting strong home purchase and refinance activity
- Mortgage portfolio of $2,458 billion, up 22% year-over-year, driven by strong new business activity
- Serious delinquency rate of 2.34%, up from 0.60% at March 31, 2020, driven by loans in COVID-19 forbearance, and down from 2.64% at December 31, 2020
- Completed nearly 94,000 loan workouts
- 51% of mortgage portfolio covered by credit enhancements
- New business activity of $14 billion, up 40% year-over-year, driven by the low interest rate environment
- Mortgage portfolio of $394 billion, up 15% year-over-year, driven by strong loan purchase and securitization activity
- Delinquency rate, which does not include loans in forbearance, increased to 0.17%, up from 0.08% at March 31, 2020
- 92% of mortgage portfolio covered by credit enhancements
"Freddie Mac continued to support homebuyers and renters, providing $377 billion of liquidity for home purchases, refinancings, and the multifamily market in the first quarter of 2021. We have also helped hundreds of thousands of families stay in their homes through our foreclosure and eviction prevention programs. We are proud of our role in maintaining a vibrant housing market while providing critical assistance to borrowers and lenders during the pandemic."
Christian M. Lown
Chief Financial Officer
Totals may not add due to rounding.
Freddie Mac First Quarter 2021 Financial Results
April 29, 2021
Page 2
McLean, VA - Freddie Mac (OTCQB: FMCC) today reported net income of $2.8 billion for the first quarter of 2021, an increase of $2.6 billion year-over-year, primarily driven by higher net revenues and lower credit-related expense. The company also reported comprehensive income of $2.4 billion for the first quarter of 2021, an increase of $1.8 billion year-over-year.
Net revenues increased 118% year-over-year to $5.3 billion, primarily driven by higher net interest income and higher net investment gains. Net interest income increased 31% year-over-year to $3.6 billion, primarily driven by growth in the Single-Family mortgage portfolio and higher deferred fee income recognition due to faster loan prepayments as a result of the low mortgage interest rate environment. Net investment gains were $1.2 billion, compared to net investment losses of $0.8 billion for the first quarter of 2020. This change was primarily driven by higher revenues from Multifamily loan purchase and securitization activities, while the first quarter of 2020 included significant spread-related losses as a result of the market volatility caused by the pandemic.
Credit-related expense declined 63% year-over-year to $0.4 billion, driven by improving economic conditions. Credit-related expense in the first quarter of 2020 was primarily driven by the negative economic effects of the pandemic.
Summary of Condensed Consolidated Statements of Comprehensive Income (Loss)
(Dollars in millions) | 1Q 2021 | 4Q 2020 | Change | 1Q 2020 | Change | |||||
Net interest income | $3,639 | $3,653 | $(14) | $2,785 | $854 | |||||
Guarantee fee income | 248 | 281 | (33) | 377 | (129) | |||||
Investment gains (losses), net | 1,208 | 856 | 352 | (835) | 2,043 | |||||
Other income (loss) | 178 | 232 | (54) | 95 | 83 | |||||
Net revenues | 5,273 | 5,022 | 251 | 2,422 | 2,851 | |||||
Benefit (provision) for credit losses | 196 | 813 | (617) | (1,233) | 1,429 | |||||
Credit enhancement expense | (335) | (327) | (8) | (231) | (104) | |||||
Benefit for (decrease in) credit enhancement | ||||||||||
recoveries | (257) | (385) | 128 | 467 | (724) | |||||
Real estate owned (REO) operations expense | (8) | (10) | 2 | (85) | 77 | |||||
Credit-related expense | (404) | 91 | (495) | (1,082) | 678 | |||||
Administrative expense | (639) | (706) | 67 | (587) | (52) | |||||
Temporary Payroll Tax Cut Continuation Act of | ||||||||||
2011 expense | (534) | (495) | (39) | (432) | (102) | |||||
Other expense | (215) | (243) | 28 | (103) | (112) | |||||
Operating expense | (1,388) | (1,444) | 56 | (1,122) | (266) | |||||
Income (loss) before income tax (expense) | ||||||||||
benefit | 3,481 | 3,669 | (188) | 218 | 3,263 | |||||
Income tax (expense) benefit | (714) | (756) | 42 | (45) | (669) | |||||
Net income (loss) | 2,767 | 2,913 | (146) | 173 | 2,594 | |||||
Total other comprehensive income (loss), net of | ||||||||||
taxes and reclassification adjustments | (389) | (391) | 2 | 449 | (838) | |||||
Comprehensive income (loss) | $2,378 | $2,522 | $(144) | $622 | $1,756 | |||||
Conservatorship metrics (in billions) | ||||||||||
Net worth | $2.4 | $9.3 | ||||||||
$18.8 | $16.4 | $9.5 | ||||||||
Senior preferred stock liquidation preference | 89.1 | 86.5 | 2.5 | 81.8 | 7.3 | |||||
Remaining Treasury funding commitment | 140.2 | 140.2 | - | 140.2 | - | |||||
Cumulative dividend payments to Treasury | 119.7 | 119.7 | - | 119.7 | - | |||||
Cumulative draws from Treasury | 71.6 | 71.6 | - | 71.6 | - | |||||
Totals may not add due to rounding.
Freddie Mac First Quarter 2021 Financial Results
April 29, 2021
Page 3
Segment Financial Results and Business Highlights
During the first quarter of 2021, Freddie Mac's chief operating decision maker began making decisions about allocating resources and assessing segment performance based on two reportable segments - Single-Family and Multifamily. In prior periods, the company managed its business based on three reportable segments - Single- Family Guarantee, Multifamily, and Capital Markets. In connection with this change, the company has also changed the measure of segment profit and loss for each segment to be based on segment net income and comprehensive income calculated using the same accounting policies the company uses to prepare its general purpose financial statements in conformity with generally accepted accounting principles. The financial results of each reportable segment include directly attributable revenue and expenses. The company allocates interest expense and other debt funding and hedging-related costs to each reportable segment using a funds transfer pricing process. The company fully allocates to each reportable segment the administrative expenses and other centrally-incurred costs that are not directly attributable to a particular segment using various methodologies depending on the nature of the expense. As a result, the sum of each income statement line item for the two reportable segments is equal to that same income statement line item for the consolidated entity. The company has discontinued the reclassifications of certain activities between various line items that were included in its previous measure of segment profit and loss. As a result, the company has also discontinued the use of Segment Earnings and therefore no longer presents net interest income, net interest yield, and guarantee fee income on an "adjusted," or non-GAAP, basis.
Prior period information has been revised to conform to the current period presentation. For more information about the company's reportable segments, see Note 15 to the financial statements included in the company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2021.
Freddie Mac First Quarter 2021 Financial Results
April 29, 2021
Page 4
Single-Family Segment
Financial Results
Net Revenues | Net Income | Comprehensive Income |
(In millions) | (In millions) | (In millions) |
$3,849
$3,419 $3,409
$2,554 $2,667
1Q20 2Q20 3Q20 4Q20 1Q21
$1,747 | $1,738 | $1,373 | $1,410 | ||||||
$1,282 | $875 | $1,272 | |||||||
$772 | $796 | ||||||||
$411 | |||||||||
1Q20 | 2Q20 | 3Q20 | 4Q20 | 1Q21 | 1Q20 | 2Q20 | 3Q20 | 4Q20 | 1Q21 |
(Dollars in millions) | 1Q 2021 | 4Q 2020 | Change | 1Q 2020 | Change | |||||
Net interest income | $3,308 | $3,350 | $(42) | $2,485 | $823 | |||||
Guarantee fee income | 89 | 30 | 59 | (13) | 102 | |||||
Investment gains (losses), net | 300 | (158) | 458 | 24 | 276 | |||||
Other income (loss) | 152 | 187 | (35) | 58 | 94 | |||||
Net revenues | 3,849 | 3,409 | 440 | 2,554 | 1,295 | |||||
Benefit (provision) for credit losses | 146 | 790 | (644) | (1,166) | 1,312 | |||||
Credit enhancement expense | (325) | (321) | (4) | (227) | (98) | |||||
Benefit for (decrease in) credit enhancement | ||||||||||
recoveries | (245) | (379) | 134 | 439 | (684) | |||||
REO operations expense | (8) | (10) | 2 | (85) | 77 | |||||
Credit-related expense | (432) | 80 | (512) | (1,039) | 607 | |||||
Administrative expense | (488) | (564) | 76 | (467) | (21) | |||||
Temporary Payroll Tax Cut Continuation Act of 2011 | ||||||||||
Expense | (534) | (495) | (39) | (432) | (102) | |||||
Other expense | (209) | (229) | 20 | (98) | (111) | |||||
Operating expense | (1,231) | (1,288) | 57 | (997) | (234) | |||||
Income (loss) before income tax (expense) benefit | 2,186 | 2,201 | (15) | 518 | 1,668 | |||||
Income tax (expense) benefit | (448) | (454) | 6 | (107) | (341) | |||||
Net income (loss) | 1,738 | 1,747 | (9) | 411 | 1,327 | |||||
Total other comprehensive income (loss), net of tax | (328) | (374) | 46 | 385 | (713) | |||||
Comprehensive income (loss) | $1,410 | $1,373 | $37 | $796 | $614 | |||||
Key Drivers
Net income and comprehensive income increased year-over-year, primarily driven by:
- Higher net interest income primarily due to mortgage portfolio growth and higher deferred fee income recognition, which was driven by a higher deferred fee balance and faster loan prepayments as a result of the low mortgage interest rate environment; and
- Lower credit-related expense primarily driven by a benefit for credit losses as a result of improving economic conditions in the first quarter of 2021, partially offset by a decrease in credit enhancement recoveries. Credit- related expense in the first quarter of 2020 was primarily driven by the negative economic effects of the pandemic.
Freddie Mac First Quarter 2021 Financial Results
April 29, 2021
Page 5
Single-Family Segment
Business Results
New Business Activity | Mortgage Portfolio | Serious Delinquency Rate | |||||||||||||||||||||||||||||||||||
(UPB in billions) | (UPB in billions) | ||||||||||||||||||||||||||||||||||||
3.04% | |||||||||||||||||||||||||||||||||||||
$2,458 | |||||||||||||||||||||||||||||||||||||
2.48% | 2.64% | ||||||||||||||||||||||||||||||||||||
$383 | $2,326 | 2.34% | |||||||||||||||||||||||||||||||||||
$337 | $362 | $2,179 | |||||||||||||||||||||||||||||||||||
$232 | $274 | $2,020 | $2,061 | ||||||||||||||||||||||||||||||||||
$138 | $236 | $273 | 0.60% | ||||||||||||||||||||||||||||||||||
$172 | |||||||||||||||||||||||||||||||||||||
$83 | $109 | ||||||||||||||||||||||||||||||||||||
$101 | $89 | ||||||||||||||||||||||||||||||||||||
$55 | $60 | ||||||||||||||||||||||||||||||||||||
1Q20 | 2Q20 | 3Q20 | 4Q20 | 1Q21 | 1Q20 2Q20 3Q20 4Q20 1Q21 | 1Q20 | 2Q20 | 3Q20 | 4Q20 | 1Q21 | |||||||||||||||||||||||||||
Home purchase | Refinance | ||||||||||||||||||||||||||||||||||||
New Business Statistics:
Average guarantee fee rate charged (bps) Weighted average original loan-to-value (LTV) (%) Weighted average original credit score First-time homebuyers (% of home purchase loans) Single-Family homes funded (in thousands)
Purchase borrowers (in thousands) Refinance borrowers (in thousands)
CRT issuance protected UPB (in billions)
Portfolio Statistics:
Average guarantee fee rate charged (bps) Weighted average current LTV (%) Weighted average current credit score Loan count (in millions)
Credit-Related Statistics:
Loan workout activity (in thousands)
Loans in forbearance, based on loan count (%) Current (%)
Past due (%)
Credit enhancement coverage (%)
NM - not meaningful.
1Q 2021 | 4Q 2020 | Change | 1Q 2020 | Change | ||||
50 | 47 | 3 | 49 | 1 | ||||
69 | 70 | (1) | 74 | (5) | ||||
759 | 761 | (2) | 752 | 7 | ||||
46 | 45 | 1 | 47 | (1) | ||||
1,231 | 1,292 | (61) | 526 | 705 | ||||
291 | 356 | (65) | 217 | 74 | ||||
940 | 936 | 4 | 309 | 631 | ||||
$245 | $167 | $78 | $141 | $104 | ||||
45 | 44 | 1 | 41 | 4 | ||||
58 | 58 | - | 58 | - | ||||
754 | 754 | - | 748 | 6 | ||||
12 | 12 | - | 11 | 1 | ||||
94 | 133 | (39) | 11 | 83 | ||||
2.19 | 2.70 | (0.51) | 0.14 | 2.05 | ||||
0.32 | 0.37 | (0.05) | NM | NM | ||||
1.87 | 2.33 | (0.46) | NM | NM | ||||
51 | 51 | - | 58 | (7) | ||||
Business Highlights
- The company provided funding for 1.2 million single-family homes, nearly 940,000 of which were refinance loans. First-time homebuyers represented 46% of new single-family purchase loans.
- Single-Familyloan workout activity increased to 94,000, from 11,000 in the first quarter of 2020, driven by completed forbearance agreements and payment deferrals primarily related to the COVID-19 pandemic.
- 2.19% of loans in the Single-Family mortgage portfolio, based on loan count, were in forbearance as of March 31, 2021.
- Credit enhancement coverage of the Single-Family mortgage portfolio decreased to 51% from 58% in the first quarter of 2020, primarily due to a higher proportion of recently acquired loans with lower LTV ratios and the high volume of new business activity which has not been included in credit risk transfer (CRT) transactions yet, but may be included in future periods.
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Freddie Mac - Federal Home Loan Mortgage Corporation published this content on 29 April 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 29 April 2021 12:13:04 UTC.