Q4 2023 Federal Home Loan Mortgage Corp Earnings Call

February 14, 2024

Yeah.

Good morning, and thank you for joining us for our presentation of Freddie Macs fourth quarter and full year 2023 financial results I'm, Jeff Markowitz, Deputy CEO and senior Vice President of external Affairs, and corporate Communications, we're joined today by our Chief Financial Officer, Chris.

Operator: We're joined today by our Chief Financial Officer, Chris Lau. Before we begin, we'd like to point out that during the call, Mr. Loudon 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 annual report on Form 10-K filed today. You'll find the 10-K, Irving's 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. We ask that the call not be rebroadcast or transcribed.

<unk>.

Before we begin we'd like to point out that during the call. Mr. Wound 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 expectation.

These factors can be found in the company's annual report on Form 10-K filed today, you'll find the 10-K earnings press release and related materials posted on the Investor Relations section of Freddie Mac Dot com.

This call is recorded and a replay will soon be available on Freddie Mac Dot com, we ask them to call not be rebroadcast or transcribed.

Chris Lown: With that, I'll turn the call over to Freddie Mac CFO Chris Lown. Good morning, and thank you for joining our call to review Freddie Mac's fourth quarter and full year 2023 financial results. For the company, 2023 marked a year of continued progress. We put our housing mission at the center of all we do, helping more than 1.4 million families buy, refinance, or rent a home in the past year. And of the more than 800,000 home purchases we financed in 2023, nearly 51% of those who purchased a primary residence were first-time homebuyers. That is the highest percentage of first-time homebuyers since Freddie Mac started tracking that statistic three decades ago. Freddie Mac achieved these mission-oriented goals while continuing to develop a strong and talented workforce, manage its risks, and deliver solid financial results. Now, let's take a look at those results in more detail.

That I will turn the call over to Freddie Mac CFO, Chris Lown.

Good morning, and thank you for joining our call to review Freddie Mac's fourth quarter and full year 2023 financial results.

For the company 2023 marked a year of continued progress we put our housing mission at the center of all we do helping more than $1 4 million families by refinance or rent a home in the past year.

And of the more than 800000 home purchases, we finance in 2023, nearly 51% of those who purchased a primary residents were first time homebuyers that has the highest percentage of first time homebuyers since Freddie Mac started tracking that statistic three decades ago.

<unk> achieved these mission oriented goals, while continuing to develop a strong and talented workforce manage its risks and deliver solid financial results now lets take a look at those results in more detail.

Chris Lown: This morning, we reported full-year 2023 net income of $10.5 billion, an increase of 13% from the prior year, and comprehensive income of $10.7 billion, an increase of 19% from the prior year. These increases were primarily driven by a credit reserve release in the single-family business, which resulted from an improvement in house prices in 2023. Full-year net revenues of $21.2 billion were slightly lower than last year, as the increase in net interest income was offset by lower non-interest income. Full-year net interest income was $18.5 billion, a 3% year-over-year increase driven primarily by higher investments' net interest income as a result of higher short-term interest rates. The increase in investments net interest income was partially offset by lower guarantee net interest income, which declined by 7% year over year.

This morning, we reported full year 2023, net income of $10 5 billion, an increase of 13% from the prior year and comprehensive income of $10 7 billion in.

An increase of 19% from the prior year.

These increases were primarily driven by a credit reserve release in the single family business, which resulted from an improvement in house prices in 2023.

Full year net revenues of $21 2 billion were slightly lower than last year as the increase in net interest income was offset by lower noninterest income.

Full year net interest income was $18 5 billion.

A 3% year over year increase driven primarily by higher investments net interest income as a result of higher short term interest rates.

The increase in investments net interest income was partially offset by lower guarantee net interest income, which declined by 7% year over year.

Chris Lown: This was primarily driven by a decrease in deferred fee income as prepayments slowed due to higher mortgage rates. Non-interest income was $2.7 billion, down 18% year-over-year, as the prior year period included spread-related gains on commitments to hedge the single-family securitization pipeline that did not recur in 2023. An improvement in house prices drove an $872 million benefit for credit losses this year versus a provision of $1.8 billion in the prior year. In 2022, the provision for credit losses will be driven by deterioration in housing market conditions.

This was primarily driven by a decrease in deferred fee income as prepayments slowed due to higher mortgage rates.

Noninterest income was $2 $7 billion down 18% year over year as the prior year period included spread related gains on commitments to hedge the single family securitization pipeline that did not recur in 2023.

An improvement in house prices drove an $872 million benefit for credit losses, this year versus a provision of $1 8 billion in the prior year.

In 2020 to the provision for credit losses was driven by deterioration in housing market conditions.

Chris Lown: Our non-interest expense grew 14% year-over-year, or $1.1 billion, to $8.9 billion. The increase in our net credit enhancement expense was due to a higher volume of outstanding cumulative CRT transactions, combined with higher losses on stacker note repurchases as well as a decrease in our credit enhancement recoveries due to a decline in expected credit losses on covered loans. 2023 non-interest expense also includes an expense accrual of $313 million related to a previously reported adverse litigation judgment.

Our noninterest expense grew 14% year over year or $1 $1 billion to $8 9 billion.

Primarily driven by an increase of $646 million and our net credit enhancement expense.

The increase in our net credit enhancement expense was due to a higher volume of outstanding cumulative CRT transactions.

Bind with higher losses on Stacker note repurchases as well as a decrease in our credit enhancement recoveries due to a decline in expected credit losses on covered loans.

2023 noninterest expense also includes an expense accrual of $313 million related to a previously reported adverse litigation judgment.

Chris Lown: Our total mortgage portfolio grew 2% year-over-year to $3.5 trillion at the end of 2023, driven by a 2% increase in our single-family mortgage portfolio and a 3% increase in our multi-family mortgage portfolio. Turning to our fourth quarter 2023 results, we reported net income of $2.9 billion, an increase of 65% from the fourth quarter of 2022. The increase in net income was primarily driven by higher revenues and a credit reserve release in the single-family business. Net revenues for the fourth quarter totaled $5.4 billion, an increase of 11% year-over-year, driven by an increase in both net interest income and non-interest income. Fourth quarter net interest income of $4.8 billion was up 4% from the prior year quarter. This was primarily driven by an increase in our investment's net interest income, which benefited from higher short-term interest rates. Non-interest income for the fourth quarter was $604 million, an increase of 147% from the prior year quarter.

Our total mortgage portfolio grew 2% year over year to $3 five trillion at the end of 2023, driven by a 2% increase in our single family mortgage portfolio and a 3% increase in our multifamily mortgage portfolio.

Turning to our fourth quarter 2023 results, we reported net income of $2 9 billion in.

An increase of 65% from the fourth quarter of 2022.

The increase in net income was primarily driven by higher revenues and a credit reserve release in the single family business.

Net revenues for the fourth quarter totaled $5 4 billion.

An increase of 11% year over year, driven by an increase in both net interest income and noninterest income.

Fourth quarter net interest income of $4 8 billion was up 4% from the prior year quarter.

This was primarily driven by an increase in our investments net interest income, which benefited from higher short term interest rates.

Noninterest income for the fourth quarter was $604 million, an increase of 147% from the prior year quarter. This was primarily driven by higher multifamily guarantee income and higher net investment gains, which benefited from a decline in interest rates in the quarter and higher volume of single family held for sale loan sales.

Chris Lown: This was primarily driven by higher multifamily guarantee income and higher net investment gains, which benefited from a decline in interest rates in the quarter and a higher volume of single-family health-for-sale loan sales. Our benefit for credit losses last quarter was $467 million and was primarily driven by a credit reserve release in our single-family business due to an improvement in house prices. In the prior year quarter, we had a credit reserve provision of $575 million that was driven by a deterioration in house prices. Non-interest expense for the fourth quarter was $2.2 billion, up $148 million, or 7% year-over-year, primarily driven by a decrease in credit enhancement recoveries, which was due to a decline in expected credit losses on covered loans.

Our benefit for credit losses last quarter was $467 million and was primarily driven by a credit reserve release in our single family business due to an improvement in house prices.

In the prior year quarter, we had a credit reserve provision of $575 million that was driven by a deterioration in house prices.

Noninterest expense for the fourth quarter was $2 2 billion.

Up $148 million or 7% year over year, primarily driven by a decrease in credit enhancement recoveries, which was due to a decline in expected credit losses on covered loans turning to our individual business segments single family reported full year net income of $9 billion, an increase of $1 1 billion or 40.

14% from the prior year this.

This was primarily driven by a credit reserve release in 2023.

Chris Lown: Turning to our individual business segments, single-family reported full-year net income of $9 billion, an increase of $1.1 billion, or 14% from the prior year. This was primarily driven by a credit reserve release in 2023. The benefit for credit losses was $1.2 billion, driven by an improvement in house prices.

The benefit for credit losses was $1 2 billion driven.

Driven by an improvement in house prices in 2022, we had a provision expense of $1 8 billion, which was primarily driven by deterioration in housing market conditions and a slowdown in actual house price appreciation.

House prices increased six 6% in 2023 compared to four 9% in 2022.

Chris Lown: In 2022, we had a provision expense of $1.8 billion, which was primarily driven by deterioration in housing market conditions and a slowdown in actual house price appreciation. However, house prices increased 6.6% in 2023 compared to 4.9% in 2022. Our current forecast assumes house prices will grow by 2.8% over the next 12 months and 2% over the subsequent 12 months, whereas our December 2022 forecast assumes a decline of 3% in the next 12 months, followed by a decline of 1.8% in the subsequent 12 months.

Our current forecast assumes house prices will grow by two 8% over the next 12 months and 2% over the subsequent 12 months, whereas our December 2022 forecast assumed a decline of 3% in the next 12 months followed by a decline of one 8% in the subsequent 12 months.

The single family allowance for credit losses coverage ratio at the end of the year was 20 basis points down from 25 basis points a year earlier.

Full year single family net revenues of $18 3 billion declined by $484 million or 3% from 2022.

This decline was primarily driven by lower noninterest income of $610 million a.

A decline of $1 $1 billion year over year as the prior year period included spread related gains on commitments to hedge the single family securitization pipeline that did not recur in 2023.

Chris Lown: The Single Family Allowance for Credit Losses coverage ratio at the end of the year was 20 basis points, down from 25 basis points a year earlier. Full year single family net revenues of $18.3 billion declined by $484 million, or 3% from 2022. This decline was primarily driven by lower non-interest income of $610 million, a decline of $1.1 billion year-over-year, as the prior year period included spread-related gains on commitments to hedge the single-family securitization pipeline that did not recur in 2023. This decline was partially offset by higher net interest income of $17.7 billion, which increased 3% year-over-year, primarily driven by higher investments in net interest income benefiting from higher interest rates, partially offset by lower deferred fee income, driven by slower mortgage prepayments.

This decline was partially offset by higher net interest income of $17 7 billion.

Which increased 3% year over year, primarily driven by higher investments net interest income benefiting from higher interest rates, partially offset by lower deferred fee income driven by slower mortgage prepayments.

Liquidation rate on our single family mortgage portfolio declined to eight 3% for 2023 versus 12, 4% for 2022.

Full year, new business activity was 300 billion.

Down 241 billion or 45% from 2022, as both refinance and purchase activity declined due to higher mortgage interest rates.

According to Freddie Mac's primary mortgage market survey mortgage rates for the 30 year at the end of 2023 were $6 six 1%.

From 642% on December 31, 2022.

Home purchase volume of 265 billion accounted for 88% of our total new business activity for the year.

As I noted earlier first time homebuyers represented 51% of new single family home purchase loans.

Chris Lown: Full year new business activity was $300 billion, down $241 billion or 45% from 2022 as both refinance and purchase activity declined due to higher mortgage interest rates. According to Freddie Mac's primary mortgage market survey, mortgage rates for the 30-year fixed at the end of 2023 were 6.61%, up from 6.42% on December 31, 2022. Home purchase volume of $265 billion accounted for 88% of our total new business activity for the year. As I noted earlier, first-time homebuyers represented 51% of new single-family home purchase loans.

The average guaranty fee rate charged on new business was 56 basis points up five basis points from 2022.

The credit characteristics of our new business remains strong with an average estimated loan to value ratio of 78% and a weighted average credit score of 752.

Our single family mortgage portfolio increased 2% year over year to more than three trillion at the end of 2023.

Our single family portfolio credit characteristics remained strong with a weighted average current loan to value ratio at 52% and the weighted average current credit score at $7 55.

Our single family serious delinquency rate declined to 55 basis points as of December 31, 2023 down 11 basis points from 66 basis points at year end 2022.

Chris Lown: The average guarantee fee rate charged on new business was 56 basis points, up five basis points from 2022. The credit characteristics of our new business remain strong, with an average estimated loan-to-value ratio of 78% and a weighted average credit score of 752. Our single-family mortgage portfolio increased 2% year over year to more than $3 trillion at the end of 2023. Our single-family portfolio credit characteristics remain strong, with the weighted average current loan-to-value ratio at 52% and the weighted average current credit score at 755. Our single-family serious delinquency rate declined to 55 basis points as of December 31, 2023, down 11 basis points from 66 basis points at year-end 2022. The single-family serious delinquency rate remains historically low and is down eight basis points from the pre-COVID rate of 63 basis points at the end of 2019. During the year, we helped approximately 81,000 families remain in their homes through loan workouts. However, our loan workouts have continued to decline, in line with the decline in the seriously delinquent loan population.

The single family serious delinquency rate remains historically low and is down eight basis points from the pre COVID-19 rate of 63 basis points at the end of 2019.

During the year, we helped approximately 81000 families remain in their homes through loan workouts. Our loan workouts have continued to decline in line with the decline in the seriously delinquent loan population.

At the end of the year, 61% of our single family portfolio had some form of credit enhancement.

Moving to multifamily the business reported full year net income of $1 5 billion.

A 5% from the prior year, primarily driven by higher noninterest income.

Full year net revenues of $3 billion increased 18% year over year. This.

This increase was primarily driven by an increase in noninterest income, which increased 32% year over year to $2 1 billion.

Primarily driven by lower fair value losses on guarantee assets as a result of lower medium term interest rates.

The provision for credit losses for 2023 was $300 million.

An increase of $231 million from 2020 to the.

The increased credit reserve build was primarily driven by heightened uncertainty and forecasted economic in multifamily market conditions as well as deterioration in overall loan performance multi.

Multifamily new business activity for the full year it was 48 billion.

A decrease of 34% from 2022 and below the FHFA cap of 75 billion.

Chris Lown: At the end of the year, 61% of our single-family portfolio had some form of credit enhancement. Moving to multifamily, the business reported full-year net income of $1.5 billion, a 5% increase from the prior year, primarily driven by higher non-interest income. Full-year net revenues of $3 billion increased 18% year-over-year.

The decline in new business activity was driven by the overall slowdown in the multifamily origination market as higher rates reduced the demand for multifamily financing.

For 2024, FHFA has reduced the cap to $70 billion with at least 50% of the activity to support mission driven affordable housing.

Our multifamily mortgage portfolio at the end of 2023 was 441 billion.

An increase of 3% year over year.

Chris Lown: This increase was primarily driven by an increase in non-interest income, which increased 32% year-over-year to $2.1 billion, primarily driven by lower fair value losses on guaranteed assets as a result of lower medium-term interest rates. The provision for credit losses for 2023 was $300 million, an increase of $231 million from 2022. The increased credit reserve bill was primarily driven by heightened uncertainty in forecasted economic and multifamily market conditions, as well as deterioration in overall loan performance. Multifamily new business activity for the full year was $48 billion, a decrease of 34% from 2022 and below the FHFA cap of $75 billion. The decline in new business activity was driven by an overall slowdown in the multifamily origination market as higher rates reduced the demand for multifamily finances.

The multifamily delinquency rate was 28 basis points at the end of the year from 12 basis points at the end of 2022.

This increase was primarily driven by an increase in delinquent loans in our senior housing and small balance loan portfolios.

89% of these delinquent loans have credit enhancement coverage, reducing our credit risk exposure at year end, 94% of the multifamily mortgage portfolio was covered by credit enhancements.

Our net worth increased to $47 $7 billion at the end of the year, representing a 29% increase from 2022.

In conclusion, Freddie Mac made home possible for more than 1 million families. In 2023, while delivering solid financial results. Looking ahead, we will continue to serve our mission, while remaining safe and sound.

Okay.

[music].

Okay.

Yes.

Okay.

Yes.

Okay.

Yeah.

Yes.

[music].

<unk>.

[music].

Yeah.

[music].

Jeff Markowitz: At year-end, 94% of the multifamily mortgage portfolio was covered by credit enhancement. Our net worth increased to $47.7 billion at the end of the year, representing a 29% increase from 2022. In conclusion, Freddie Mac made home possible for more than a million families in 2023 while delivering solid financial results. Looking ahead, we will continue to serve our mission while remaining safe and sound. Thank you for watching!

Yes.

Yeah.

[music].

Jeff Markowitz: Good morning, and thank you for joining us for a presentation of Freddie Mac's fourth quarter and full year 2023 financial results. I'm Jeff Markowitz, Deputy CAO and Senior Vice President of External Affairs and Corporate Communications. We're joined today by our Chief Financial Officer, Chris Lowndes. Before we begin, we'd like to point out that during the call, Mr. Lowndes 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 differ from its expectations.

Okay.

[music].

Operator: A description of these factors can be found in the company's annual report on Form 10-K filed today. You'll find the 10-K, Irving's press release, and related materials posted on the Investor Relations section of freddymac.com. This call is recorded, and a replay will soon be available on freddymac.com. We ask that the call not be rebroadcast or transcribed.

Chris Lown: With that, I'll turn the call over to Freddie Mac CFO, Chris Lown. Good morning, and thank you for joining our call to review Freddie Mac's fourth quarter and full year 2023 financial results. For the company, 2023 marked a year of continued progress. We put our housing mission at the center of all we do, helping more than 1.4 million families buy, refinance, or rent a home in the past year. And of the more than 800,000 home purchases we financed in 2023, nearly 51% of those who purchased a primary residence were first-time homebuyers. That is the highest percentage of first-time homebuyers since Freddie Mac started tracking that statistic three decades ago. Freddie Mac achieved these mission-oriented goals while continuing to develop a strong and talented workforce, manage its risks, and deliver solid financial results. Now, let's take a look at those results in more detail.

Good morning, and thank you for joining us for our presentation of Freddie Macs fourth quarter and full year 2023 financial results I'm, Jeff Markowitz, Deputy CEO and senior Vice President of external Affairs and corporate Communications, we're joined today by our Chief Financial Officer, Chris Loud.

Chris Lown: This morning, we reported full-year 2023 net income of $10.5 billion, an increase of 13% from the prior year, and comprehensive income of $10.7 billion, an increase of 19% from the prior year. These increases were primarily driven by a credit reserve release in the single-family business, which resulted from an improvement in house prices in 2023. Full-year net revenues of $21.2 billion were slightly lower than last year, as the increase in net interest income was offset by lower non-interest income. Full-year net interest income was $18.5 billion, a 3% year-over-year increase driven primarily by higher investments' net interest income as a result of higher short-term interest rates. The increase in the investment's net interest income was partially offset by lower guarantee net interest income, which declined by 7% year over year. This was primarily driven by a decrease in deferred fee income as prepayment slowed due to higher mortgage rates.

Scripting of these factors can be found in the company's annual report on Form 10-K filed today, you'll find the 10-K earnings press release and related materials posted on the Investor Relations section of Freddie Mac Dot com.

This call is recorded and a replay will soon be available on Freddie Mac Dot com, we ask them to call not be rebroadcast or transcribed with that I will turn the call over to Freddie Mac CFO, Chris Lown.

Good morning, and thank you for joining our call to review Freddie Mac's fourth quarter and full year 2023 financial results.

For the company 2023 marked a year of continued progress we put our housing mission at the center of all we do helping more than 1.4 million families by refinance or rent a home in the past year.

Chris Lown: Non-interest income was $2.7 billion, down 18% year-over-year, as the prior year period included spread-related gains on commitments to hedge the single-family securitization pipeline that did not recur in 2023. An improvement in house prices drove an $872 million benefit for credit losses this year versus a provision of $1.8 billion in the prior year. In 2022, the provision for credit losses was driven by deterioration in housing market conditions. Our non-interest expense grew 14% year-over-year, or $1.1 billion, to $8.9 billion, primarily driven by an increase of $646 million in our net credit enhancement expense, combined with higher losses on stacker note repurchases, as well as a decrease in our credit enhancement recoveries due to a decline in expected credit losses on covered 2023 non-interest expense also includes an expense accrual of $313 million related to a previously reported adverse litigation judgment.

This morning, we reported full year 2023, net income of $10.5 billion, an increase of 13% from the prior year and comprehensive income of $10 $7 billion, an increase of 19% from the prior year.

These increases were primarily driven by a credit reserve release in the single family business, which resulted from an improvement in house prices in 2023.

Full year net revenues of $21 $2 billion were slightly lower than last year as the increase in net interest income was offset by lower noninterest income.

Full year net interest income was $18 5, billion% to 3% year over year increase driven primarily by higher investments net interest income as a result of higher short term interest rates.

The increase in investments in net interest income was partially offset by lower guarantee net interest income, which declined by 7% year over year.

This was primarily driven by a decrease in deferred fee income as prepayments slowed due to higher mortgage rates.

Chris Lown: Our total mortgage portfolio grew 2% year over year to $3.5 trillion at the end of 2023, driven by a 2% increase in our single-family mortgage portfolio and a 3% increase in our multi-family mortgage portfolio. Turning to our fourth quarter 2023 results, we reported net income of $2.9 billion, an increase of 65% from the fourth quarter of 2022. The increase in net income was primarily driven by higher revenues and a credit reserve release in the single-family business. Net revenues for the fourth quarter totaled $5.4 billion, an increase of 11% year-over-year, driven by an increase in both net interest income and non-interest income. Fourth quarter net interest income of $4.8 billion was up 4% from the prior year quarter. This was primarily driven by an increase in our investment's net interest income, which benefited from higher short-term interest rates. Non-interest income for the fourth quarter was $604 million, an increase of 147% from the prior year quarter.

An improvement in house prices drove an $872 million benefit for credit losses, this year versus a provision of $1.8 billion in the prior year.

In 2020 to the provision for credit losses was driven by deterioration in the housing market conditions.

Our noninterest expense grew 14% year over year or $1 $1 billion to $8 9 billion, primarily driven by an increase of $646 million and our net credit enhancement expense.

The increase in our net credit enhancement expense was due to a higher volume of outstanding cumulative CRT transactions.

Bind with higher losses on Stacker note repurchases as well as a decrease in our credit enhancement recoveries due to a decline in expected credit losses on covered loans.

2023 noninterest expense also includes an expense accrual of $313 million related to a previously reported adverse litigation judgment.

Our total mortgage portfolio grew 2% year over year to 3.5 trillion dollars at the end of 2023, driven by a 2% increase in our single family mortgage portfolio and a 3% increase in our multifamily mortgage portfolio.

Turning to our fourth quarter 2023 results. We reported net income of 2.9 billion, an increase of 65% from the fourth quarter of 2022.

The increase in net income was primarily driven by higher revenues and a credit reserve release in our single family business.

Net revenues for the fourth quarter totaled $5 4 billion, an increase of 11% year over year, driven by an increase in both net interest income and noninterest income.

Fourth quarter net interest income of $4 $8 billion was up 4% from the prior year quarter.

This was primarily driven by an increase in our investments net interest income, which benefited from higher short term interest rates.

Chris Lown: Turning to our individual business segments, Single Family reported full-year net income of $9 billion, an increase of $1.1 billion, or 14% from the prior year. This was primarily driven by a credit reserve release in 2023. The benefit for credit losses was $1.2 billion, driven by an improvement in house prices.

Our benefit for credit losses last quarter was $467 million and was primarily driven by a credit reserve release in our single family business due to an improvement in house prices.

In the prior year quarter, we had a credit reserve provision of $575 million that was driven by a deterioration in house prices.

Chris Lown: In 2022, we had a provision expense of $1.8 billion, which was primarily driven by deterioration in housing market conditions and a slowdown in actual house price appreciation. However, house prices increased 6.6% in 2023 compared to 4.9% in 2022. Our current forecast assumes house prices will grow by 2.8% over the next 12 months and 2% over the subsequent 12 months, whereas our December 2022 forecast assumed a decline of 3% in the next 12 months, followed by a decline of 1.8% in the subsequent 12 months.

Noninterest expense for the fourth quarter was $2.2 billion up $148 million or 7% year over year, primarily driven by a decrease in credit enhancement recoveries, which was due to a decline in expected credit losses on covered loans turning to our individual business segments single family reported full year net income of 9 billion.

An increase of $1.1 billion or 14% from the prior year. This.

This was primarily driven by a credit reserve release in 2023.

The benefit for credit losses was $1 $2 billion driven by an improvement in house prices in 'twenty 'twenty. Two we had a provision expense of $1.8 billion, which was primarily driven by deterioration in housing market conditions and a slowdown in actual house price appreciation.

House prices increased six 6% in 2023 compared to 4.9% in 2022.

Chris Lown: The Single-Family Allowance for Credit Losses coverage ratio at the end of the year was 20 basis points, down from 25 basis points a year earlier. Full-year single-family net revenues of $18.3 billion declined by $484 million, or 3% from 2022. This decline was primarily driven by lower non-interest income of $610 million, a decline of $1.1 billion year-over-year, as the prior year period included spread-related gains on commitments to hedge the single-family securitization pipeline that did not recur in 2023. This decline was partially offset by higher net interest income of $17.7 billion, which increased 3% year-over-year, primarily driven by higher investments in net interest The liquidation rate on our single family mortgage portfolio declined to 8.3% for 2023 versus 12.4% for 2022.

Our current forecast assumes house prices will grow by 2.8% over the next 12 months and 2% over the subsequent 12 months, whereas our December 2022 forecast assumed a decline of 3% in the next 12 months followed by a decline of one 8% in the subsequent 12 months.

The single family allowance for credit losses coverage ratio at the end of the year was 20 basis points down from 25 basis points a year earlier.

Full year single family net revenues of $18 $3 billion declined by $484 million or 3% from 2022.

This decline was primarily driven by lower noninterest income of $610 million, a decline of $1 $1 billion year over year as the prior year period included spread related gains on commitments to hedge the single family securitization pipeline that did not recur in 2023.

This decline was partially offset by higher net interest income of $17 7 billion, which increased 3% year over year, primarily driven by higher investments net interest income benefiting from higher interest rates, partially offset by lower deferred fee income driven by slower mortgage prepayments.

Liquidation rate on our single family mortgage portfolio declined to eight 3% for 2023 versus 12, 4% for 2022.

Chris Lown: Full year new business activity was $300 billion, down $241 billion, or 45% from 2022, as both refinance and purchase activity declined due to higher mortgage interest rates. According to Freddie Mac's primary mortgage market survey, mortgage rates for the 30-year fixed at the end of 2023 were 6.61%, up from 6.42% on December 31, 2022. Home purchase volume of $265 billion accounted for 88% of our total new business activity for the year. As I noted earlier, first-time homebuyers represented 51% of new single-family home purchase loans. The average guarantee fee rate charged on new business was 56 basis points, up five basis points from 2022.

Full year, new business activity was $300 billion down $241 billion or 45% from 2022, as both refinance and purchase activity declined due to higher mortgage interest rates.

According to Freddie Macs primary mortgage market survey mortgage rates for the 30 year at the end of 2023 were 6.61% up from $6 four 2% on December 31 2022.

Home purchase volume of $265 billion accounted for 88% of our total new business activity for the year.

As I noted earlier first time homebuyers represented 51% of new single family home purchase loans.

The average guaranty fee rate charged on new business was 56 basis points up five basis points from 2022.

Chris Lown: The credit characteristics of our new business remain strong, with an average estimated loan to value ratio of 78% and a weighted average credit score of 752. Our single-family mortgage portfolio increased 2% year over year to more than $3 trillion at the end of 2023. Our single-family portfolio credit characteristics remain strong, with the weighted average current loan-to-value ratio at 52% and the weighted average current credit score at 755. Additionally, our single-family serious delinquency rate declined to 55 basis points as of December 31, 2023, down 11 basis points from 66 basis points at year-end 2022. The single-family serious delinquency rate remains historically low and is down eight basis points from the pre-COVID rate of 63 basis points at the end of 2019. During the year, we helped approximately 81,000 families remain in their homes through Lone Workout. Our loan workouts have continued to decline, in line with the decline in the seriously delinquent loan population.

The credit characteristics of our new business remains strong with an average estimated loan to value ratio of 78% and a weighted average credit score of 752.

Our single family mortgage portfolio increased 2% year over year to more than three trillion at the end of 2023.

Our single family portfolio credit characteristics remained strong with a weighted average current loan to value ratio at 52% and the weighted average current credit score at $7 55.

Our single family serious delinquency rate declined to 55 basis points as of December 31, 2023 down 11 basis points from 66 basis points at year end 2022.

The single family serious delinquency rate remains historically low and is down eight basis points from the pre COVID-19 rate of 63 basis points at the end of 2019.

Chris Lown: At the end of the year, 61% of our single-family portfolio had some form of credit enhancement. Moving to multifamily, the business reported full-year net income of $1.5 billion, 5% from the prior year, primarily driven by higher non-interest income. Full-year net revenues of $3 billion increased 18% year-over-year.

At the end of the year, 61% of our single family portfolio had some form of credit enhancement move.

Moving to multifamily the business reported full year net income of $1 $5 billion of 5% from the prior year, primarily driven by higher noninterest income.

Full year net revenues of $3 billion increased 18% year over year.

Chris Lown: This increase was primarily driven by an increase in non-interest income, which increased 32% year-over-year to $2.1 billion, primarily driven by lower fair value losses on guarantee assets as a result of lower medium-term interest rates. The provision for credit losses for 2023 was $300 million, an increase of $231 million from 2022. The increased credit reserve bill was primarily driven by heightened uncertainty in forecasted economic and multifamily market conditions, as well as deterioration in overall loan performance. Multifamily new business activity for the full year was $48 billion, a decrease of 34% from 2022 and below the FHFA cap of $75 billion. The decline in new business activity was driven by an overall slowdown in the multifamily origination market as higher rates reduced the demand for multifamily financing.

This increase was primarily driven by an increase in noninterest income, which increased 32% year over year to $2 1 billion, primarily driven by lower fair value losses on guarantee assets as a result of lower medium term interest rates.

The provision for credit losses for 2023 was $300 million, an increase of $231 million from 2022.

The increased credit reserve build was primarily driven by heightened uncertainty and forecasted economic in multifamily market conditions as well as deterioration in overall loan performance.

Multifamily new business activity for the full year. It was 48 billion a decrease of 34% from 2022 and below the FHFA cap of 75 billion.

The decline in new business activity was driven by the overall slowdown in the multifamily origination market as higher rates reduced the demand for multifamily financing.

Chris Lown: For 2024, FHFA has reduced the cap to $70 billion, with at least 50% of the activity to support mission-driven affordable housing. Our multifamily mortgage portfolio at the end of 2023 was $441 billion, an increase of 3% year over year. The multifamily delinquency rate was 28 basis points at the end of the year from 12 basis points at the end of 2022. This increase was primarily driven by an increase in delinquent loans in our senior housing and small balance loan portfolio. 89% of these delinquent loans have credit enhancement coverage, reducing our credit risk exposure. At year-end, 94% of the multifamily mortgage portfolio was covered by credit enhancement. Our net worth increased to $47.7 billion at the end of the year, representing a 29% increase from 2022. In conclusion, Freddie Mac made home ownership possible for more than a million families in 2023 while delivering solid financial results. Looking ahead, we will continue to serve our mission while remaining safe and sound.

For 2024, FHFA has reduced the cap to $70 billion with at least 50% of the activity to support mission driven affordable housing.

Our multifamily mortgage portfolio at the end of 2023 was $441 billion, an increase of 3% year over year.

Our multifamily delinquency rate was 28 basis points at the end of the year up from 12 basis points at the end of 2022.

This increase was primarily driven by an increase in delinquent loans in our senior housing and small balance loan portfolios.

89% of these delinquent loans have credit enhancement coverage, reducing our credit risk exposure at year end, 94% of the multifamily mortgage portfolio was covered by credit enhancements.

Our net worth increased to $47 $7 billion at the end of the year, representing a 29% increase from 2022.

Q4 2023 Federal Home Loan Mortgage Corp Earnings Call

Request a DemoDemo

FMCC

Freddie Mac

Earnings