Federal Home Loan Mortgage (FMCC) 28 Jul 222022 Q2 Earnings call transcript

Good morning, and thank you for joining us for the presentation of Freddie Mac's second quarter 2022 financial results. I'm Jeff Markowitz, Deputy CAO and SVP of External Affairs and Corporate Communications. We're joined today by our CEO, Michael DeVito; and our CFO, Chris Lown.

Before we begin, we'd like to point out that during the call, Mr. DeVito and Mr. statements and assumptions other forward-looking key the make drivers business factors. may based about on company's Lown Changes in these results to factors could cause vary its the from expectations. materially company's actual the filed today. those be factors A report description XX-Q found of in Form on company's can quarterly

Relations XX-Q, a Investor or replay We be on of find will on the related ask posted is freddiemac.com. call rebroadcast press soon transcribed. earnings You'll freddiemac.com. This not that and call release materials the section and be the recorded, available

that, to DeVito. With the Mac's Freddie over I'll call turn CEO, Michael

review opportunities Good the second offer and Freddie you morning, company's thoughts and collaboratively we have for environment. economic quarter a the to thank of challenges industry overview performance. rental opportunities joining increase the across performance sustainable will us I the equity. It to homeownership was provide some by on for good our I Today, and will our quarter Mac. discuss posed an to work also

begin with So how on objectives. a performed of let's strategic our brief summary we

and made our flowing served to homebuyers our In Mac. XXX,XXX buy, first-time Freddie the refinance U.S. families essential half sales $XXX to quarter provide the billion and a and helped to Liquidity we Loans purchases of nearly provided to owner-occupied home affordability market. take finance refinancings, money sluggish system. approximately by of borrowers that housing or we Overall, liquidity to financed renters. the support mission we up we seriously and home. proper keep operation all for rent our market, through liquidity, of the stability First, saw obligation a is

income. affordable low- financed refinanced families. loans moderate-income all XX% families area below at all of or were earning rental median And of to XXX% units XX% affordable of were to we to Additionally,

keenly on prudent We be continue management. to risk focused

June were For our single-family lows. at near multifamily rates delinquency pre-pandemic and XX example, serious

$XX and earned increased our We billion quarter, the We in to net billion. also delivered solid worth $X.X financial results.

months appreciation Of and last rates, percentage has is XX% current taken House in on housing are points deficit persistent work complexity X.X Higher rates shortage course, of of mortgage estimate house to exceeded Much the XXXX. by is the the in all families. continued XX% X average appreciation supply to greater year expected challenging many the and being price in a first slowing nearly environment. increased the XXXX. and of market and of importance We price this homes. in be driven of nearly affordability for our Mortgage economic millions. lack

observe when that rent by improve fall homeownership, rising These to of often and disproportionately it is the we a broadly. sustainable to the across work so underserved help continue important at increase why industry time That affordability cost promote We challenged populations. inflation families equity. on rental is challenges are more

are making progress. We

have We funding sustainable the provided affordable increase housing. rental to availability and of

earning at Impact Half Bond program properties XX% This to units income. low-income in included median or of bonds the Multifamily area housing below X,XXX these are second seniors, Our supporting units in senior billion affordable social across X Arizona. surpassed affordable $XX of quarter.

quarter's first automated deposit first added capabilities available underwriting we of announcement on Building in to income, the assessment June, of direct automated industry's lenders.

And time directly, using income and account risk can reduce lenders from now by Freddie verify These lenders employment together, bank automated reduced. account for Taken cycle to data assets, utilizing application and is can borrower-approved bank Mac capabilities acceptance. data. loan

Housing Plan, Finally, we've here we and progress introduced as our Equitable well. Finance made

for more beginning on-time on-time should in now reporting help purchase a are to for possible renters this efforts mortgages. XX,XXX loan included program. groups are credit rent enrolled rent households more This month, our build expanded underserved credit we across to And decisions. history. now rental properties than our our XXX example, For multifamily make in qualify payments it payment

are education childhood curriculum awareness The capability of a through enhancing we which update our year. conduct CreditSmart, through financial homeownership. hundreds financial financial of on sessions from building We also includes centerpiece the a focus

we schedule. this offer $X housing affordable bonds, month, to historically single-family surpassed underserved and program XXXX in our bond months ahead This billion affordable serves homeownership goal Additionally, supports markets. of

neighborhoods. to desirable looking They issues. properties, help accessory also offset eligibility borrowers are dwelling secured the We to rental offer single-family ADUs of garage-top while income To of at density for address properties from expanded in deficit highly suites the and we with increasing units. mortgages requirements attached our guest supply apartments cottages. homes, cost homeownership to in-laws by

Lastly, grow to business. sustained This work multifamily we've require start. and will commitment Success in is good all their sessions series good of held help borrowers diverse networking a and scale a close our industry together. cooperation to us time the to housing We look opportunities the lenders time on progress. in more Expect across market. you forward update with to to work from

Now Chris I'll to our you ask Lown financials. take through

and Thank Michael, you, morning. good

earned by million a to another We a $X.X for credit XX% income happy of $XXX was prior compared I'm or provision driven quarter. of quarter. a in of Mac billion had Freddie that As billion, benefit the report year losses This million decrease solid primarily net $X.X of decrease Michael to year-over-year. mentioned, $XXX

decline to income This billion in year $XXX a Second prior revenues primarily $X.X initial quarter decreased securitizations. quarter. gains noninterest purchases new pricing by X% compared lower in net by to to was and multifamily driven loan margin decline on $X.X due million billion the

business offset of improved primarily of compared from billion, by driven as increased prepayments quarter, driven in segments. million our of a slower provision income billion credit of conditions. a year million compared the income, the fee was quarter net economic growth quarter. conditions. Single-Family net $XXX resulted average decrease $XXX higher reported economic and partially benefit This interest individual million primarily in by portfolio This year $XXX mortgage forecasted portfolio of that due observed was $XXX higher and prior prior guarantee a by deferred to was of current Single-Family quarter, This a revenues prior million portfolio house $X.X appreciation and result year decrease from interest the growth losses to in driven fee Turning by rates. higher for by deterioration by income rates. continued lower price mortgage to to $X.X driven net the

$XXX billion as rising billion activity New a refinance rates. there $XXX business Refinance to billion meaningful interest was declined due $XXX mortgage year-over-year, of decline volumes in declined activity year-over-year.

points loan-to-value of the remained score credit strong, increase weighted a Single-Family the XXXX, delinquency serious second the a the XXXX Our trillion at loan average and XXX from basis to XX,XXX decline decline points XX% an continued rate XXX. The this higher to to grew with continued XX end of XX% XQ to at to XX and points, basis mortgage of current from of a and average in weighted XXXX. second due portfolio quarter Single-Family overall $X.X the workout loan characteristics quarter Single-Family population first decreased year-over-year portfolio size forbearance quarter in as from portfolio credit quarter share at market. overall activity the to basis the of ratio XX,XXX average decline.

guarantee of decline due net Single-Family from points the and of than by was slightly Multifamily does offset basis enhancements to Approximately activity mortgage was for and million, the the lower the year of coverage covered X $XXX quarter. in purchases quarter. Multifamily credit not as XX% covered lower the $XXX multifamily Multifamily to last million from billion basis on fair in credit loans and margins was by primarily down The the new ratio year-over-year at portfolio the interest on securitizations, continued second losses loan include was of initial gains guarantee income portfolio investment was value prior rates $XXX and fee the $XX increased mortgage XX second second segment in delinquency at income Single-Family enhancement. The Our rising XX% total the new end loans increased business by This our basis previous the the of of Multifamily XX points by some which end reported X net end driven portfolio billion. the quarter, points. credit quarter lower At portfolio the rate, pricing forbearance, to this outstanding to quarter, of guarantee the lower form basis second impact allowance the quarter. growth by of quarter, assets. Multifamily X.X% quarter's of was points

end net $XX.X the billion XX% Our representing that, I'll of at quarter, to the year-over-year. With increased back it Michael. over worth increase a to turn

In price solid financial To summarize, or We a uncertain families than economic continue helped this for home to to management. nationwide. Thank market, we for withstand us. to introduced results was other for innovations appreciation the good promote achieved potential time underwriting process challenge we lenders allow rent and industry refinance rising buy, the that and build factors loan and Freddie mortgage quarter across the you house and equity stress. And are risk XXX,XXX as to a housing sustainable Mac. more an rates, economic equity affordability, improve working committed to joining simplify and