Freddie Mac had its best quarter for single-family purchase mortgage activity since at least 2010, CEO Michael DeVito said.
And while refinance volume was down from the previous quarters, "it's still one of the best quarters for refinance we've had in our history," DeVito said on an earnings call Friday. "Both purchase loans and refinance loans remain at roughly double the volume prior to the pandemic."
Freddie Mac bought $299 billion in single-family loans, up from $289 billion in the second quarter, but down from $337 billion during the third quarter of 2020.
Purchase volume totaled $132 billion in the third quarter, up from $98 billion in the second quarter and $101 billion in the third quarter of 2020. Refinances totaled $167 billion, down from $190 billion in the second quarter and $236 billion in last year's third quarter.
Freddie Mac reported net income of $2.9 billion, down from $3.7 billion
The year-over-year change was primarily driven by higher net revenues and a credit reserve release in its single-family business segment.
It ended the third quarter with a net worth of $25.3 billion, up by 13% from the end of the second quarter and 82% over Sept. 30, 2020. In January, during the waning days of the Trump administration, the Federal Housing Finance Agency had modified the Perpetual Stock Purchase Agreements and
"Realized house price appreciation and improving economic conditions drove the credit reserve release of $243 million in the quarter resulting in a lower credit related expense of $194 million," Chief Financial Officer Chris Lown said on the call. "That was down from $614 million for the third quarter of 2020 which was driven by the negative impact of the COVID-19 pandemic."
Net revenue was $5.2 billion, down from $5.9 billion in the prior quarter but an increase from $5.1 billion in the previous year. Net interest income, the driver of the increase in net revenue over the second quarter of 2021, was up 28% from that period to $4.4 billion, a result of 23% growth in the single-family mortgage portfolio and a higher average guarantee fee rate of 3 basis points, Lown said.
The reserve release, however, was partly offset by higher credit enhancement expenses. Half of Freddie Mac's single family portfolio had credit enhancement coverage at the end of the third quarter, Lown said.
Single-family net income, the bulk of Freddie Mac's earnings, totaled $2 billion, down from $2.9 billion in the second quarter but up from $1.3 billion in the third quarter of 2020.
Its multifamily net income, on the other hand, was higher than it had been in the second quarter but lower on a year-over-year basis. Freddie Mac reported $891 million in the third quarter for this segment, compared with $824 million in the second quarter and $1.2 billion in the third quarter of 2020.
"Lower net investment gains drove the [year-over-year] decrease due to less gains from market spreads and lower initial pricing margin gains on new loan commitments," Lown said. "Multifamily saw new business activity of $45 billion year to date, a $3 billion decrease versus the prior year period driven by a reduced
Earlier this month, acting FHFA Director Sandra Thompson
Freddie Mac's single-family mortgage delinquency rate fell to 1.46% as of Sept. 30, from a pandemic peak of 3.04% one year prior. Approximately 1.15% of its portfolio by loan count remained in forbearance at the end of the third quarter, down from 2.95% on Sept. 30, 2020.
As for Freddie Mac's credit risk transfer program, DeVito pointed out the company conducted its first-ever tender offer for its structured agency credit risk notes from the eight issuances made between 2015 and 2017, with a cap of over $1.6 billion of original principal.
"This action effectively reduces costs related to credit risk transfer by repurchasing STACR tranches that no longer offer an economic benefit," he said.
