Freddie Mac had its strongest year for earnings since 2021, when the pandemic influenced mortgage rates and thus the housing market.
But the government-sponsored enterprise, as common since it entered conservatorship, did not address the elephant in the room on its earnings call, namely any possible release and return to being a private company.
Since the election, investors have bet the Trump Administration would do something
The positive results were released before the market opened; Freddie Mac's stock gained another 10 cents a share in pre-market trading afterwards. But when the markets opened at 9:30 eastern time, it was at $6.38 per share, according to Yahoo Finance.
"In conclusion, 2024 was another strong year for Freddie Mac as we made home possible for nearly 1.6 million families, provided billions in liquidity to the markets and built our financial strength," Jim Whitlinger, executive vice president and chief financial officer, said on the earnings call. "We are already hard at work to ensure we continue making strides in these areas in 2025 and beyond."
The company's
As a result of past increases in net worth, the liquidation preference for its senior preferred stock held by the government also increased to $129.04 billion, a gain of $3.18 billion from Sept. 30, 2024.
Freddie Mac earned $3.2 billion for the fourth quarter, slightly higher than the
While reporting higher net revenues, those were offset by Freddie Mac making a provision for credit losses of $92 billion in both of its business segments, Whitlinger said, as it added to reserves in both of its business segments. For the comparable periods it was able to take a benefit to its earnings from past credit loss set-asides of $191 million in the third quarter and $467 million for the fourth quarter of 2023.
Full year net income increased by 13% to $11.9 billion, also driven by higher net revenues that was offset by this quarter's provision in the single-family business.
"Provision for credit losses was an expense of $374 million for 2024 primarily driven by a credit reserve build attributable to new acquisitions," Whitlinger commented. "The benefit for credit losses of $1.2 billion for 2023 was primarily driven by a credit reserve release
The serious delinquency rate in its single-family portfolio was up for the second quarter in a row, and ended the period at 59 basis points, a gain of 5 basis points since Sept. 30 and a 4 basis point year-over-year increase.
Whitlinger said the increase in the rate was a result of
"We have historically observed temporary increases in delinquency rates following such events," he said.
Freddie Mac helped approximately 77,000 families remain in their homes through loan workouts during 2024 he added.
The single-family business earned $2.55 billion in the fourth quarter, down from $2.58 billion for the previous quarter and $2.67 billion for the prior year. The single-family portion of the fourth quarter provision was $38 million.
For the full year, however, single-family net income rose to $9.36 billion from $9.05 billion in 2023. This was due to an increase in revenues from higher net interest and net non-interest income, Whitlinger said.
Freddie Mac had $100 billion of new business activity in the fourth quarter, slightly higher than $98 billion three months earlier. But when compared with the prior year period, the gain was $27 billion.
Purchase business continued to dominate, at $74 billion of the fourth quarter new acquisitions. This was lower than the third quarter's $84 billion but an increase from $65 billion in the fourth quarter of 2024.
The lag between when a loan is originated and when it is delivered to Freddie Mac likely explained the increase in refinancings in the fourth quarter, because those loans were probably produced in August and September, when a rate blip occurred.
Mortgage rates ended the year 24 basis points higher at 6.85%, he said. Approximately 52% of loans acquired were for first-time home buyers.
Whitlinger delved into Freddie Mac's forecast for home prices, with a mixed bag going forward.
"House prices increased 4% in 2024 compared to a 6.8% increase in 2023," he said. "Our current forecast assumes house prices will grow by 2.7% over the next 12 months and 3.3% over the subsequent 12 months, whereas our December 2023 forecast assumed an increase of 2.8% in the next 12 months, followed by 2% growth in the subsequent 12 months."
The multifamily business had net income of $667 million, compared with $532 million in the third quarter and $256 million for the fourth quarter of 2023. Full year income of $2.5 billion was up from $1.5 billion in 2023.
The year-over-year change was due to higher net revenue and lower credit loss provisions. The 2024 set-aside was $102 million, just one-third of the $300 million provision for 2023.
In the fourth quarter, Freddie Mac made a $54 million provision for multifamily losses, compared with a $92 billion benefit in the third quarter and a $81 million set aside one year ago.
The delinquency rate did rise to 40 basis points from 39 basis points for the period ended Sept. 30, 2024. It was 0.28% at the end of the fourth quarter last year.
"This increase was primarily driven by an increase in delinquent floating rate loans, including small balance loans that are in their floating rate period," Whitlinger explained, adding that 97% of the multifamily portfolio has some form of credit enhancement, mitigating Freddie Mac's exposure.
"Total new business activity for 2024 was $65 billion, an increase of 35% compared to 2023, primarily driven by increased demand for multifamily financing as a result of lower mortgage interest rates during the second half of the year," Whitlinger noted.
He also spoke about the
"We also provide dedicated resources to renters and apartment buildings to help them plan and prepare for natural disasters, as well as respond and recover after they strike," Whitlinger said. "Providing this critical support to owners and renters not only benefits communities and investors in our company, it's the right thing to do."
