Release Date: February 13, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Federal Home Loan Mortgage Corp (FMCC, Financial) reported its strongest earnings since 2021, with a full year net income of $11.9 billion, marking a 13% increase from the prior year.
- The company's net worth reached nearly $60 billion, reflecting a 25% year-over-year growth, enhancing its financial stability.
- FMCC supported the housing market by acquiring over 1 million loans from more than 1,000 lenders, packaging them into mortgage-backed securities (MBS) totaling over $411 billion, an 18% increase from 2023.
- The company financed 52% of primary home purchases for first-time home buyers and ensured 53% of all home loans were affordable for low and moderate-income families.
- Non-interest income surged by 55% year-over-year to $4.2 billion, driven by higher revenues from loan purchase and securitization activities and lower realized losses on sales of available-for-sale securities.
Negative Points
- Provision for credit losses was an expense of $0.5 billion for the full year 2024, primarily due to a credit reserve build in the single-family segment.
- The serious delinquency rate in the single-family portfolio increased to 59 basis points, up from 55 basis points at the end of 2023, mainly due to recent hurricanes.
- The multi-family delinquency rate rose to 40 basis points from 28 basis points at the end of 2023, driven by an increase in delinquent floating rate loans.
- The average net guarantee fee rate on new business decreased by 1 basis point from 2023, potentially impacting future revenue streams.
- Despite strong financial performance, the company faced challenges with credit loss provisions due to new acquisitions and economic uncertainties affecting loan performance.
Q & A Highlights
Q: Can you elaborate on the factors driving the increase in net income for 2024?
A: James Whitlinger, Executive VP & CFO, explained that the increase in net income was primarily driven by higher net revenues, which rose due to continued mortgage portfolio growth and lower funding costs. Additionally, there was a significant increase in non-interest income, primarily from higher revenues from loan purchase and securitization activities, and lower realized losses on sales of available-for-sale securities.
Q: What were the main contributors to the growth in the single-family mortgage portfolio?
A: James Whitlinger noted that the single-family mortgage portfolio grew by 2% year over year, driven by increased refinance and purchase activity. The portfolio's credit characteristics remained strong, with a weighted average loan-to-value ratio of 52% and a credit score of 755.
Q: How did the multi-family segment perform in 2024, and what were the key drivers?
A: The multi-family segment reported a net income increase of 67% from the prior year, primarily due to higher net revenues and lower provision for credit losses. The growth was driven by increased demand for multi-family financing and a rise in securitization activities.
Q: What measures is Freddie Mac taking to support families affected by natural disasters?
A: James Whitlinger highlighted Freddie Mac's forbearance program, which offers mortgage relief for up to 12 months without incurring late fees or penalties. The company also provides resources to renters in apartment buildings to help them prepare for and recover from natural disasters.
Q: Could you discuss the outlook for house prices and how it impacts Freddie Mac's operations?
A: James Whitlinger stated that house prices increased by 4% in 2024, and the forecast assumes a growth of 2.7% over the next 12 months. This outlook impacts Freddie Mac's credit loss provisions and overall financial planning, as house price trends influence the credit characteristics of their mortgage portfolio.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
