Q1 2025 Federal Home Loan Mortgage Corp Earnings Call
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Speaker Change: Good morning, and thank you for joining us for our presentation of Freddie Mac's first quarter 2025 financial results I'm, Jeff Markowitz, Senior Vice President and Chief External Affairs Officer, We're joined today by Executive Vice President and Chief Financial Officer, Jim Wicklund <unk> before.
Before we begin today, we'd like to point out that during the call. Mr. Whit Linger 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 Form 10-Q filed today you will find the 10-Q earnings press release and related materials posted on the Investor Relations section of Freddie Mac Dot com.
Speaker Change: 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'll turn the call over to our CFO, Jim with linger.
Jim Witlinger: Good morning, and thank you for joining our call to review Freddie Mac's first quarter performance, let's start with the bottom line.
Jim Witlinger: Freddie Mac delivered a solid performance, earning $2 8 billion of net income in the first quarter driving the company's net worth to $62 billion.
Jim Witlinger: We held 313000 families across the nation by rent or refinance a home in the quarter with 52% of our single family loan purchases supporting first time, homebuyers and 92% of the eligible rental units financed affordable to middle income renters, who form the backbone of our communities.
Jim Witlinger: Our commitment to our mission is unwavering and will only improve as we work with director of U S. Federal housing Bill Pulte to streamline our operations by stripping away unnecessary bureaucracy, and eliminating nonessential activities I'll talk a little more about that and what it means for Freddie Mac before I conclude today's call. So let's get right to the financials.
Jim Witlinger: As I noted this morning, we reported first quarter 2025, net income of $2 8 billion.
Jim Witlinger: An increase of $28 million or 1% year over year.
Jim Witlinger: This increase was primarily driven by higher net interest income from continued mortgage portfolio growth and lower funding costs, partially offset by lower yields on short term investments.
Jim Witlinger: Our first quarter net interest income was $5 1 billion.
Jim Witlinger: Up $343 million or 7% year over year.
Jim Witlinger: The increase was primarily driven by continued mortgage portfolio growth in single family and an increase in the volume of fully guaranteed securitizations in multifamily.
Jim Witlinger: Noninterest income for the first quarter with $750 million, a decline of $248 million or 25% lower from the prior year quarter.
Jim Witlinger: This was primarily due to a decrease in net investment gains and multifamily.
Jim Witlinger: Noninterest expense declined $34 million or 2% year over year, primarily due to lower credit enhancement expenses, driven by lower volume of cumulative credit risk transfer transactions, our provision for credit losses was $280 million for this quarter, primarily driven by a credit reserve build in single family attributable to new App.
Jim Witlinger: Positions turning to our individual business segments. The single family segment reported net income of $2 3 billion for the quarter up $316 million or 16% year over year single family net revenues of $4 9 billion increased 10% from the prior year quarter.
Jim Witlinger: This increase was primarily driven by a 6% increase in our net interest income, which benefited from continued mortgage portfolio growth our single family mortgage portfolio at the end of the quarter was $3 one trillion.
Jim Witlinger: <unk>, 2% year over year.
Jim Witlinger: Our provision for single family credit losses was an expense of $228 million this quarter.
Jim Witlinger: Primarily due to credit reserve build for new acquisitions, the provision in the prior year quarter was $120 million, which was primarily attributable to new acquisitions and increasing mortgage interest rates.
Our current house price forecast assumes an increase of four 2% over the next 12 months and two 8% over the subsequent 12 months. This is a change from our prior forecast at the end of last quarter, which assumed two 7% and three 3% growth over the next 12 and subsequent 12 months respectively.
Jim Witlinger: The single family allowance for credit losses coverage ratio at the end of this quarter was 21 basis points unchanged from last quarter and up one basis point year over year, new business activity totaled $78 billion. This quarter up from $62 billion in the first quarter of 2020 for both home purchase and refinance activity increased due to higher.
Jim Witlinger: Our market coverage and conforming loan limits as well as house price appreciation in recent quarters refinance.
Jim Witlinger: Activity accounted for 21% of our total new business activity this quarter up from 15% in the same quarter last year as we saw mortgage rates come down throughout the quarter. The 30 year mortgage rate at the end of the quarter was $6 six 5%.
Jim Witlinger: <unk> from $6 eight 5% at the end of the fourth quarter of 2024 and from $6, 79% at the end of the first quarter 2020 for first time homebuyers represented 52% of our total new business activity are 81000 households in the first quarter.
Jim Witlinger: The average estimated guarantee fee charged on new business was 54 basis points, while the weighted average original loan to value on new purchases was 77% and a weighted average original credit score was 756 <unk>.
Jim Witlinger: Credit characteristics of our single family mortgage portfolio remained strong as well with a weighted average current loan to value ratio at 52% and a weighted average current credit score at 754.
Jim Witlinger: At the end of the quarter, 62% of our single family mortgage portfolio had some form of credit enhancement.
Jim Witlinger: The single family serious delinquency rates remained low at 59 basis points unchanged from the prior quarter and up seven basis points from the prior year quarter.
Jim Witlinger: The year over year increase was primarily due to a higher serious delinquency rate for loans originated drawing and after 2022 as well as the lingering impacts from Hurricanes that occurred late in 2024 unrelated note in the first quarter. We help approximately 25000 families remain in their homes through loan workouts.
Jim Witlinger: Moving on to multifamily the segment reported net income of $533 million, which is down $288 million or 35% from the prior year quarter. This decrease was primarily driven by lower noninterest income of $585 million, which decreased $427 million from the prior year quarter.
Jim Witlinger: It also was driven by lower revenues from held for sale loan purchases and securitization activities impacts from interest rate management activities and less favorable fair value changes from prepayment rates.
Jim Witlinger: Net interest income of $349 million was up 29% year over year, primarily driven by an increase in the volume of fully guaranteed securitizations the.
Jim Witlinger: The multifamily provision for credit losses was an expense of $52 million this quarter versus $61 million in the prior year quarter, our multifamily new business activity was $10 billion for the first quarter up 1 billion from a year ago.
Jim Witlinger: Our multifamily business provided financing for <unk> 89000, multifamily rental units in the quarter with 66% of eligible rental units affordable to low income families.
Jim Witlinger: Also in the first quarter, we securitized $16 billion of multifamily loans 5 billion more than in the prior year quarter.
Jim Witlinger: Fully guaranteed Securitizations represented 56% of total securitizations up from 36% in the first quarter 2024, the average guaranty fee on our total guarantee portfolio increased five basis points year over year to 52 basis points, our multifamily mortgage portfolio increased 5% year over year.
Jim Witlinger: Year to $467 billion.
Jim Witlinger: The multifamily delinquency rate at the end of the quarter was 46 basis points. This was up 12 basis points from 34 basis points at the end of March 2024, and up six basis points from the fourth quarter of 2024.
Jim Witlinger: The year over year increase in the delinquency rate was primarily driven by increased delinquencies in our floating rate loans, including small balance loans that are in their floating rate period, 98% of these delinquent loans had credit enhancement coverage at the end of the quarter.
Jim Witlinger: But the multifamily mortgage portfolio level, our credit enhancement coverage was <unk>, 93% on the capital front, our net worth increased to $62 4 billion at the end of the quarter, representing a 24% increase year over year.
Speaker Change: Let me conclude by noting that many of you are closely following the announcements and orders issued by director Pulte and what those mean for Freddie Mac briefly director Pulte has helped us streamline our business and harnessed the productivity of thousands of Freddie Mac employees now in the office full time, he has eliminated activities not central to Freddie Mac's mission.
Jim Witlinger: As well as requirements that make it more expensive to finance alone.
Jim Witlinger: But which might provide little tangible benefit to the majority of American renters and homebuyers. We support actions. He has taken to drive fraud and waste out of the U S housing finance system.
Jim Witlinger: We expect the savings associated with Fhfa's, new direction to reduce Freddie Mac's general and administrative expenses in 2025 and beyond.
Jim Witlinger: Furthermore, we believe that regulatory changes, making it easier for us to responsibly acquire loans will increase our revenue and enable us to provide even greater liquidity to the single family and multifamily market.
Jim Witlinger: That should enable Freddy Mac to invest more in critical technology increase our net worth and lower the cost of originating a mortgage.
Jim Witlinger: Taking a step back the director has challenged us to create a more affordable U S housing system, we're committed to rising to that challenge. Thank you for joining us today.
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Jim Witlinger: Good morning, and thank you for joining us for our presentation of Freddie Mac's first quarter 2025 financial results I'm, Jeff Markowitz, Senior Vice President and Chief External Affairs Officer, We're joined today by Executive Vice President and Chief Financial Officer, Jim Wicklund <unk>.
Jim Witlinger: Before we begin today, we'd like to point out that turning the call. Mr. Redlinger 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 Form 10-Q filed today you will find.
Speaker Change: The 10-Q 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'll turn the call over to our CFO, Jim with linger.
Jim Witlinger: Good morning, and thank you for joining our call to review Freddie Mac's first quarter performance, let's start with the bottom line.
Jim Witlinger: Freddie Mac delivered a solid performance, earning $2 $8 billion of net income in the first quarter driving the company's net worth to $62 billion. We held 313000 families across the nation by rent or refinance a home in the quarter with 52% of our single family loan purchases supporting first time homebuyer.
Jim Witlinger: Here's and 92% of the eligible rental units financed affordable to middle income renters, who form the backbone of our communities.
Jim Witlinger: Our commitment to our mission is unwavering and will only improve as we work with director of U S. Federal housing Bill Pulte to streamline our operations by stripping away unnecessary bureaucracy, and eliminating nonessential activities I'll talk a little more about that and what it means for Freddie Mac before I conclude today's call. So let's get right to the financials.
Jim Witlinger: <unk>.
Jim Witlinger: As I noted this morning, we reported first quarter 2025, net income of $2 $8 billion.
Jim Witlinger: An increase of $28 million or 1% year over year.
Jim Witlinger: This increase was primarily driven by higher net interest income from continued mortgage portfolio growth and lower funding costs, partially offset by lower yields on short term investments.
Jim Witlinger: Our first quarter net interest income was $5 $1 billion up $343 million or 7% year over year.
Jim Witlinger: The increase was primarily driven by continued mortgage portfolio growth in single family and an increase in the volume of fully guaranteed securitizations in multifamily.
Jim Witlinger: Noninterest income for the first quarter with $750 million, a decline of $248 million or 25% lower from the prior year quarter. This was primarily due to a decrease in net investment gains and multifamily noninterest.
Jim Witlinger: Noninterest expense declined $34 million or 2% year over year, primarily due to lower credit enhancement expenses, driven by lower volume of cumulative credit risk transfer transactions, our provision for credit losses was $280 million for this quarter, primarily driven by credit reserve goat and single family attributable to new App.
Jim Witlinger: Positions turning to our individual business segments. The single family segment reported net income of $2 $3 billion for the quarter up $316 million or 16% year over year single family net revenues of $4 $9 billion increased 10% from the prior year quarter.
Jim Witlinger: This increase was primarily driven by a 6% increase in our net interest income, which benefited from continued mortgage portfolio growth our single family mortgage portfolio at the end of the quarter was $3 one trillion dollars up 2% year over year.
Jim Witlinger: Our provision for single family credit losses was an expense of $228 million this quarter <unk>.
Jim Witlinger: Primarily due to credit reserve build for new acquisitions that provision in the prior year quarter was $120 million, which was primarily attributable to new acquisitions and increasing mortgage interest rates.
Jim Witlinger: Our current house price forecast assumes an increase of four 2% over the next 12 months and two 8% over the subsequent 12 months. This is a change from our prior forecast at the end of last quarter, which assumed 2.7% and 3.3% growth over the next 12 and subsequent 12 months respectively.
Jim Witlinger: The single family allowance for credit losses coverage ratio at the end of this quarter was 21 basis points unchanged from last quarter and up one basis point year over year, new business activity totaled $78 million this quarter up from $62 billion in the first quarter of 2020 for both home purchase and refinance activity increased due to higher.
Jim Witlinger: Our market coverage and conforming loan limits as well as house price appreciation in recent quarters.
Jim Witlinger: Refinance activity accounted for 21% of our total new business activity this quarter up from 15% in the same quarter last year as we saw mortgage rates come down throughout the quarter.
Jim Witlinger: The 30 year mortgage rate at the end of the quarter was 6.65% down from 6.85% at the end of the fourth quarter of 2024 and from 6.79% at the end of the first quarter 2020 for first time homebuyers represented 52% of our total new business activity are 81000 <unk>.
Jim Witlinger: Holds in the first quarter.
Jim Witlinger: The average estimate of guarantee fee charged on new business was 54 basis points, while the weighted average original loan to value on new purchases was 77% and a weighted average original credit score was 756.
Jim Witlinger: Credit characteristics of our single family mortgage portfolio remained strong as well with a weighted average current loan to value ratio at 52% and a weighted average current credit score at $7 54.
Jim Witlinger: At the end of the quarter, 62% of our single family mortgage portfolio had some form of credit enhancement.
Jim Witlinger: The single family serious delinquency rates remained low at 59 basis points unchanged from the prior quarter and up seven basis points from the prior year quarter.
Jim Witlinger: The year over year increase was primarily due to a higher serious delinquency rate for loans originated.