Federal Home Loan Mortgage Corp 8-K, filed Nov 8, 2022
Federal Home Loan Mortgage Corp (FMCC)
8-K
2022-11-08
For: 2022-11-08
View Original
Added on
April 05, 2026
About this 8-K
Federal Home Loan Mortgage Corp filed this 8-K on November 8, 2022.
Items reported
- Item 2.02: Financial results
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 8, 2022
(Exact name of registrant as specified in its charter)
Freddie Mac
| Federally chartered corporation | ||||||||||||||
| (State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) | ||||||||||||
| (Address of principal executive offices) | (Zip Code) | |||||||||||||||||||
Registrant’s telephone number, including area code: (703 ) 903-2000
Not applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |||||
| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |||||
| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |||||
| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | |||||
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
| None | N/A | N/A | ||||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02. Results of Operations and Financial Condition.
On November 8, 2022, Freddie Mac (formally known as the Federal Home Loan Mortgage Corporation) announced its results of operations for the quarter ended September 30, 2022. A copy of the related press release for the quarter ended September 30, 2022 is being filed as Exhibit 99.1 to this report and is incorporated herein by reference. In addition, a copy of the Third Quarter 2022 Financial Results Supplement is being furnished as Exhibit 99.2 to this report and is incorporated herein by reference.
Exhibit 99.1 submitted herewith shall be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934.
Exhibit 99.2 submitted herewith shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liabilities of Section 18, nor shall it be deemed to be incorporated by reference into any disclosure document relating to Freddie Mac, except to the extent, if any, expressly set forth by specific reference in such document.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
The exhibits listed in the Exhibit Index below are being filed or furnished as part of this Current Report on Form 8-K:
| Exhibit Number | Description of Exhibit | |||||||
| 99.1 | ||||||||
| 99.2 | ||||||||
| 104 | Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document | |||||||
__________________________________________________________________________________________________________
Freddie Mac Form 8-K
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| FEDERAL HOME LOAN MORTGAGE CORPORATION | ||||||||
| By: | /s/ | Christian M. Lown | ||||||
| Christian M. Lown | ||||||||
| Executive Vice President - Chief Financial Officer | ||||||||
Date: November 8, 2022
__________________________________________________________________________________________________________
Freddie Mac Form 8-K
| Exhibit 99.1 | ||||||||
Freddie Mac Reports Net Income of $1.3 Billion for Third Quarter 2022
Making Home Possible for 542,000 Households in Third Quarter 2022
•Financed 392,000 mortgages, with 56% of eligible loans being affordable to low- to moderate-income families, and enabled 130,000 first-time homebuyers to purchase a home
•Financed 150,000 rental units, with 96% of eligible units being affordable to low- to moderate-income families
Third Quarter 2022 Financial Results
Market Liquidity Provided - $135 Billion | Homes and Rental Units Financed - 542,000 | Net Worth - $35.2 Billion | Total Mortgage Portfolio - $3.4 Trillion | |||||||||||||||||
| Consolidated | •Net income of $1.3 billion, a decrease of 55% year-over-year, primarily driven by a credit reserve build in Single-Family •Net revenues of $5.2 billion, a decrease of 1% year-over-year, as higher net interest income in Single-Family was offset by a decline in non-interest income in Multifamily •Provision for credit losses of $1.8 billion, primarily driven by deterioration in housing market conditions, including lower observed and forecasted house price appreciation •New business activity of $121 billion, down 60% year-over-year, as refinance activity slowed significantly due to rising mortgage interest rates •Mortgage portfolio of $3.0 trillion, up 11% year-over-year, driven by an increase in average portfolio loan size and a higher share of single-family mortgage debt outstanding •Serious delinquency rate of 0.67%, down from 1.46% at September 30, 2021, driven by the decline of loans in forbearance •Completed approximately 28,000 loan workouts •61% of mortgage portfolio covered by credit enhancements •New business activity of $14 billion, down 22% year-over-year, due to rising interest rates and increased competition •Mortgage portfolio of $416 billion, up 3% year-over-year, as new business activities were partially offset by borrower prepayments •Delinquency rate of 0.13%, up from 0.12% at September 30, 2021 •95% of mortgage portfolio covered by credit enhancements | “In a dynamic economic environment, Freddie Mac continued to provide much-needed liquidity, stability, and affordability to the housing finance system. We earned quarterly net income of $1.3 billion and added to the capital that supports our mission. With our focus on risk management, we are actively managing the company to support homebuyers, renters, and the housing market throughout the economic cycle.” Michael J. DeVito Chief Executive Officer | ||||||||||||
Net Revenues $5.2 Billion Net Income $1.3 Billion Comprehensive Income $1.1 Billion | ||||||||||||||
Single-Family | ||||||||||||||
Net Revenues $4.4 Billion Net Income $0.8 Billion Comprehensive Income $0.8 Billion | ||||||||||||||
Multifamily | ||||||||||||||
Net Revenues $0.8 Billion Net Income $0.5 Billion Comprehensive Income $0.3 Billion | ||||||||||||||
Freddie Mac Third Quarter 2022 Financial Results
November 8, 2022
Page 2
McLean, VA — Freddie Mac (OTCQB: FMCC) today reported net income of $1.3 billion for the third quarter of 2022, a decrease of 55% year-over-year, primarily driven by a credit reserve build in Single-Family.
Net revenues were $5.2 billion, down 1% year-over-year, as higher net interest income in Single-Family was offset by a decline in non-interest income in Multifamily. Net interest income was $4.6 billion, up 3% year-over-year, as continued mortgage portfolio growth and higher average portfolio guarantee fee rates were partially offset by lower deferred fee income, which was driven by slower prepayments as a result of higher mortgage interest rates. Non-interest income decreased 24% year-over year to $0.6 billion, primarily driven by lower guarantee income and a decrease in net investment gains in Multifamily.
Provision for credit losses was $1.8 billion for the third quarter of 2022, primarily driven by deterioration in housing market conditions, including lower observed and forecasted house price appreciation. The benefit for credit losses of $0.2 billion in the third quarter of 2021 was primarily driven by observed house price appreciation and reduced expected credit losses related to COVID-19.
Non-interest expense was $1.8 billion, down 1% year-over-year, primarily driven by a benefit for credit enhancement recoveries due to the corresponding increase in the provision for credit losses. This decrease was partially offset by higher credit enhancement expense as a result of a higher volume of outstanding credit risk transfer transactions and higher spreads on recent transactions.
Summary of Consolidated Results of Operations
(Dollars in millions) | 3Q 2022 | 2Q 2022 | Change | 3Q 2021 | Change | |||||||||||||||||||||||||||
| Net interest income | $4,554 | $4,759 | ($205) | $4,418 | $136 | |||||||||||||||||||||||||||
| Non-interest income | 627 | 645 | (18) | 829 | (202) | |||||||||||||||||||||||||||
| Net revenues | 5,181 | 5,404 | (223) | 5,247 | (66) | |||||||||||||||||||||||||||
| Benefit (provision) for credit losses | (1,796) | (307) | (1,489) | 243 | (2,039) | |||||||||||||||||||||||||||
| Non-interest expense | (1,825) | (2,020) | 195 | (1,844) | 19 | |||||||||||||||||||||||||||
| Income (loss) before income tax (expense) benefit | 1,560 | 3,077 | (1,517) | 3,646 | (2,086) | |||||||||||||||||||||||||||
| Income tax (expense) benefit | (247) | (624) | 377 | (727) | 480 | |||||||||||||||||||||||||||
| Net income (loss) | 1,313 | 2,453 | (1,140) | 2,919 | (1,606) | |||||||||||||||||||||||||||
| Other comprehensive income (loss), net of taxes and reclassification adjustments | (181) | (66) | (115) | (10) | (171) | |||||||||||||||||||||||||||
| Comprehensive income (loss) | $1,132 | $2,387 | ($1,255) | $2,909 | ($1,777) | |||||||||||||||||||||||||||
| Conservatorship metrics (in millions) | ||||||||||||||||||||||||||||||||
| Net worth | $35,230 | $34,098 | $1,132 | $25,311 | $9,919 | |||||||||||||||||||||||||||
| Senior preferred stock liquidation preference | 106,746 | 104,359 | 2,387 | 95,050 | 11,696 | |||||||||||||||||||||||||||
| Remaining Treasury funding commitment | 140,162 | 140,162 | — | 140,162 | — | |||||||||||||||||||||||||||
| Cumulative dividend payments to Treasury | 119,680 | 119,680 | — | 119,680 | — | |||||||||||||||||||||||||||
| Cumulative draws from Treasury | 71,648 | 71,648 | — | 71,648 | — | |||||||||||||||||||||||||||
Freddie Mac Third Quarter 2022 Financial Results
November 8, 2022
Page 3
| Single-Family Segment | ||
| Financial Results | ||
Net Revenues
(In billions)
Net Income
(In billions)
Comprehensive Income
(In billions)
| (Dollars in millions) | 3Q 2022 | 2Q 2022 | Change | 3Q 2021 | Change | |||||||||||||||||||||||||||
| Net interest income | $4,363 | $4,535 | ($172) | $4,080 | $283 | |||||||||||||||||||||||||||
| Non-interest income | 58 | 336 | (278) | (119) | 177 | |||||||||||||||||||||||||||
| Net revenues | 4,421 | 4,871 | (450) | 3,961 | 460 | |||||||||||||||||||||||||||
| Benefit (provision) for credit losses | (1,784) | (298) | (1,486) | 244 | (2,028) | |||||||||||||||||||||||||||
| Non-interest expense | (1,653) | (1,854) | 201 | (1,672) | 19 | |||||||||||||||||||||||||||
| Income (loss) before income tax (expense) benefit | 984 | 2,719 | (1,735) | 2,533 | (1,549) | |||||||||||||||||||||||||||
| Income tax (expense) benefit | (141) | (551) | 410 | (505) | 364 | |||||||||||||||||||||||||||
| Net income (loss) | 843 | 2,168 | (1,325) | 2,028 | (1,185) | |||||||||||||||||||||||||||
| Other comprehensive income (loss), net of taxes and reclassification adjustments | (39) | 5 | (44) | 18 | (57) | |||||||||||||||||||||||||||
| Comprehensive income (loss) | $804 | $2,173 | ($1,369) | $2,046 | ($1,242) | |||||||||||||||||||||||||||
Key Drivers
Net income decreased year-over-year, mainly driven by:
•A provision for credit losses for the third quarter of 2022, primarily driven by deterioration in housing market conditions, including lower observed and forecasted house price appreciation. The benefit for credit losses in the third quarter of 2021 was primarily driven by observed house price appreciation and reduced expected credit losses related to COVID-19.
•Higher net interest income primarily due to continued mortgage portfolio growth and higher average portfolio guarantee fee rates. This increase was partially offset by lower deferred fee income, which was driven by slower prepayments as a result of higher mortgage interest rates.
Freddie Mac Third Quarter 2022 Financial Results
November 8, 2022
Page 4
| Single-Family Segment | ||
| Business Results | ||
New Business Activity
(UPB in billions)
Mortgage Portfolio
(UPB in billions)
Serious Delinquency Rate
| 3Q 2022 | 2Q 2022 | Change | 3Q 2021 | Change | ||||||||||||||||||||||||||||
| New Business Statistics: | ||||||||||||||||||||||||||||||||
| Single-Family homes funded (in thousands) | 392 | 468 | (76) | 1,027 | (635) | |||||||||||||||||||||||||||
| Purchase borrowers (in thousands) | 297 | 263 | 34 | 415 | (118) | |||||||||||||||||||||||||||
| Refinance borrowers (in thousands) | 95 | 205 | (110) | 612 | (517) | |||||||||||||||||||||||||||
Affordable to low- to moderate-income families (%)(1) | 56 | 61 | (5) | 52 | 4 | |||||||||||||||||||||||||||
First-time homebuyers (%)(2) | 49 | 49 | — | 46 | 3 | |||||||||||||||||||||||||||
| Average guarantee fee rate charged (bps) | 54 | 52 | 2 | 48 | 6 | |||||||||||||||||||||||||||
| Weighted average original loan-to-value (LTV) (%) | 78 | 75 | 3 | 72 | 6 | |||||||||||||||||||||||||||
| Weighted average original credit score | 747 | 744 | 3 | 750 | (3) | |||||||||||||||||||||||||||
| UPB covered by new CRT issuance (in billions) | $136 | $151 | ($15) | $167 | ($31) | |||||||||||||||||||||||||||
| Portfolio Statistics: | ||||||||||||||||||||||||||||||||
| Average guarantee fee rate charged (bps) | 48 | 47 | 1 | 46 | 2 | |||||||||||||||||||||||||||
| Weighted average current LTV (%) | 53 | 52 | 1 | 55 | (2) | |||||||||||||||||||||||||||
| Weighted average current credit score | 756 | 756 | — | 756 | — | |||||||||||||||||||||||||||
| Loan count (in millions) | 13.6 | 13.5 | 0.1 | 12.8 | 0.8 | |||||||||||||||||||||||||||
| Credit-Related Statistics: | ||||||||||||||||||||||||||||||||
| Loan workout activity (in thousands) | 28 | 37 | (9) | 73 | (45) | |||||||||||||||||||||||||||
| Credit enhancement coverage (%) | 61 | 59 | 2 | 50 | 11 | |||||||||||||||||||||||||||
(1) Eligible loans acquired affordable to families earning at or below 120% of area median income (AMI).
(2) Calculated as a percentage of purchase borrowers with loans secured by primary residences.
Business Highlights
•The company provided funding for 392,000 single-family homes, 297,000 of which were purchase loans, as refinance activity slowed significantly due to higher mortgage interest rates. First-time homebuyers represented 49% of new single-family home purchase loans.
•Single-Family loan workout activity decreased to 28,000 from 73,000 in the third quarter of 2021, as the overall forbearance population continued to decline.
•Credit enhancement coverage of the Single-Family mortgage portfolio increased to 61% from 50% in the third quarter of 2021, primarily due to the new business activity included in credit risk transfer (CRT) transactions.
Freddie Mac Third Quarter 2022 Financial Results
November 8, 2022
Page 5
| Multifamily Segment | ||
| Financial Results | ||
Net Revenues
(In billions)
Net Income
(In billions)
Comprehensive Income
(In billions)
| (Dollars in millions) | 3Q 2022 | 2Q 2022 | Change | 3Q 2021 | Change | |||||||||||||||||||||||||||
| Net interest income | $191 | $224 | ($33) | $338 | ($147) | |||||||||||||||||||||||||||
| Non-interest income | 569 | 309 | 260 | 948 | (379) | |||||||||||||||||||||||||||
| Net revenues | 760 | 533 | 227 | 1,286 | (526) | |||||||||||||||||||||||||||
| Benefit (provision) for credit losses | (12) | (9) | (3) | (1) | (11) | |||||||||||||||||||||||||||
| Non-interest expense | (172) | (166) | (6) | (172) | — | |||||||||||||||||||||||||||
| Income (loss) before income tax (expense) benefit | 576 | 358 | 218 | 1,113 | (537) | |||||||||||||||||||||||||||
| Income tax (expense) benefit | (106) | (73) | (33) | (222) | 116 | |||||||||||||||||||||||||||
| Net income (loss) | 470 | 285 | 185 | 891 | (421) | |||||||||||||||||||||||||||
| Other comprehensive income (loss), net of taxes and reclassification adjustments | (142) | (71) | (71) | (28) | (114) | |||||||||||||||||||||||||||
| Comprehensive income (loss) | $328 | $214 | $114 | $863 | ($535) | |||||||||||||||||||||||||||
Key Drivers
Net income decreased year-over-year, mainly driven by lower non-interest income from:
•Lower guarantee income due to fair value losses on guarantee assets as a result of higher interest rates.
•Lower net investment gains due to spread widening and lower margins on new loan purchases and securitizations, partially offset by gains from interest-rate risk management activities.
Freddie Mac Third Quarter 2022 Financial Results
November 8, 2022
Page 6
| Multifamily Segment | ||
| Business Results | ||
New Business Activity
(UPB in billions)
Mortgage Portfolio
(UPB in billions)
Delinquency Rate
| 3Q 2022 | 2Q 2022 | Change | 3Q 2021 | Change | ||||||||||||||||||||||||||||
| New Business Statistics: | ||||||||||||||||||||||||||||||||
Number of rental units financed (in thousands)(1) | 150 | 148 | 2 | 161 | (11) | |||||||||||||||||||||||||||
Affordable to low-income families (%)(2) | 75 | 80 | (5) | 68 | 7 | |||||||||||||||||||||||||||
Affordable to low- to moderate-income families (%)(3) | 96 | 97 | (1) | 94 | 2 | |||||||||||||||||||||||||||
| Weighted average original LTV (%) | 59 | 63 | (4) | 67 | (8) | |||||||||||||||||||||||||||
| Weighted average original debt service coverage ratio | 1.31 | 1.33 | (0.02) | 1.35 | (0.04) | |||||||||||||||||||||||||||
| UPB covered by new CRT issuance (in billions) | $11 | $21 | ($10) | $18 | ($7) | |||||||||||||||||||||||||||
| Portfolio Statistics: | ||||||||||||||||||||||||||||||||
| Average guarantee fee rate charged (bps) | 43 | 43 | — | 42 | 1 | |||||||||||||||||||||||||||
| Unit count (in thousands) | 4,523 | 4,562 | (39) | 4,624 | (101) | |||||||||||||||||||||||||||
| Credit-Related Statistics: | ||||||||||||||||||||||||||||||||
| Credit enhancement coverage (%) | 95 | 96 | (1) | 94 | 1 | |||||||||||||||||||||||||||
(1) 2Q 2022 data revised to reflect updated information.
(2) Eligible units acquired affordable to families earning at or below 80% of AMI.
(3) Eligible units acquired affordable to families earning at or below 120% of AMI.
Business Highlights
•The company provided financing for 150,000 multifamily rental units. 75% of the eligible multifamily rental units financed were affordable to low-income families.
•The Multifamily delinquency rate increased slightly year-over-year and also increased quarter-over-quarter. The quarter-over-quarter increase was primarily due to delinquencies related to two loan pools having a common sponsor. The loans in these two pools are included in K Certificates with subordination.
•The UPB of mortgage loans covered by CRT transactions decreased primarily due to no issuances of Structured Credit Risk Trust note transactions during the third quarter of 2022.
•While the mortgage portfolio increased year-over-year, total portfolio unit count decreased, primarily driven by the impact of portfolio payoffs and higher average per unit costs of newly financed multifamily properties as a result of property price appreciation.
Freddie Mac Third Quarter 2022 Financial Results
November 8, 2022
Page 7
About Freddie Mac’s Conservatorship
Since September 2008, Freddie Mac has been operating under conservatorship with FHFA as Conservator. The support provided by Treasury pursuant to the Purchase Agreement enables the company to maintain access to the debt markets and have adequate liquidity to conduct its normal business operations. The amount of funding available to Freddie Mac under the Purchase Agreement was $140.2 billion at September 30, 2022.
Pursuant to the Purchase Agreement, Freddie Mac will not be required to pay a dividend to Treasury on the senior preferred stock until it has built sufficient capital to meet the capital requirements and buffers set forth in the Enterprise Regulatory Capital Framework. As a result, the company was not required to pay a dividend to Treasury on the senior preferred stock in September 2022. As the company builds capital during this period, the quarterly increases in its Net Worth Amount have been, or will be, added to the aggregate liquidation preference of the senior preferred stock. The liquidation preference of the senior preferred stock increased to $106.7 billion on September 30, 2022 based on the increase in the Net Worth Amount during the second quarter of 2022, and will increase to $107.9 billion on December 31, 2022 based on the increase in the Net Worth Amount during the third quarter of 2022.
Additional Information
For more information, including information related to Freddie Mac’s financial results, conservatorship, and related matters, see the company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2022 and the company’s Third Quarter 2022 Financial Results Supplement. These documents are available on the Investor Relations page of the company’s website at www.FreddieMac.com.
Additional information about Freddie Mac and its business is also set forth in the company’s other filings with the SEC, which are available on the Investor Relations page of the company’s website at www.FreddieMac.com and the SEC’s website at www.sec.gov. Freddie Mac encourages all investors and interested members of the public to review these materials for a more complete understanding of the company’s financial results and related disclosures.
Webcast Announcement
Management will host a conference call at 9 a.m. Eastern Time on November 8, 2022 to share the company’s results with the media. The conference call will be concurrently webcast. To access the audio webcast, use the following link: https://edge.media-server.com/mmc/p/navm6y6a. The replay will be available on the company’s website at www.FreddieMac.com for approximately 30 days. All materials related to the call will be available on the Investor Relations page of the company’s website at www.FreddieMac.com.
| Media Contact: Frederick Solomon (703) 903-3861 | Investor Contact: Laurie Garthune (571) 382-4732 | ||||
* * * *
This press release contains forward-looking statements, which may include statements pertaining to the conservatorship, the company’s current expectations and objectives for its Single-Family and Multifamily segments, its efforts to assist the housing market, liquidity and capital management, economic and market conditions and trends including, but not limited to, changes in observed and forecasted house price appreciation, its market share, the effect of legislative and regulatory developments and new accounting guidance, the credit quality of loans the company owns or guarantees, the costs and benefits of the company’s CRT transactions, the effects of natural disasters, other catastrophic events, including the effects of the COVID-19 pandemic, and significant climate change effects and actions taken in response thereto on its business, results of operations, and financial condition. Forward-looking statements involve known and unknown risks and uncertainties, some of which are beyond the company’s control. Management’s expectations for the company’s future necessarily involve a number of assumptions, judgments, and estimates, and various factors, including changes in market conditions, liquidity, mortgage spreads, credit outlook, actions by the U.S. government (including FHFA, Treasury, and Congress) and state and local governments, changes in the fiscal and monetary policies of the Federal Reserve, uncertainty about the duration, severity, and effects of the COVID-19 pandemic and actions taken in response thereto, and the impacts of legislation or regulations and new or amended accounting guidance, that could cause actual results to differ materially from these expectations. These assumptions, judgments, estimates, and factors are discussed in the company’s Annual Report on Form 10-K for the year ended December 31, 2021,
Freddie Mac Third Quarter 2022 Financial Results
November 8, 2022
Page 8
Quarterly Reports on Form 10-Q for the quarters ended March 31, 2022, June 30, 2022, and September 30, 2022, and Current Reports on Form 8-K, which are available on the Investor Relations page of the company’s website at www.FreddieMac.com and the SEC’s website at www.sec.gov. The company undertakes no obligation to update forward-looking statements it makes to reflect events or circumstances occurring after the date of this press release.
Freddie Mac makes home possible for millions of families and individuals by providing mortgage capital to lenders. Since its creation by Congress in 1970, the company has made housing more accessible and affordable for homebuyers and renters in communities nationwide. The company is building a better housing finance system for homebuyers, renters, lenders, and taxpayers. Learn more at FreddieMac.com, Twitter @FreddieMac and Freddie Mac’s blog FreddieMac.com/blog.
Freddie Mac Third Quarter 2022 Financial Results
November 8, 2022
Page 9
FREDDIE MAC
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited)
(In millions, except share-related amounts) | 3Q 2022 | 2Q 2022 | 3Q 2021 | |||||||||||||||||
| Net interest income | ||||||||||||||||||||
| Interest income | $21,894 | $20,008 | $15,791 | |||||||||||||||||
| Interest expense | (17,340) | (15,249) | (11,373) | |||||||||||||||||
| Net interest income | 4,554 | 4,759 | 4,418 | |||||||||||||||||
| Non-interest income (loss) | ||||||||||||||||||||
| Guarantee income | 125 | 205 | 246 | |||||||||||||||||
| Investment gains (losses), net | 415 | 321 | 383 | |||||||||||||||||
| Other income (loss) | 87 | 119 | 200 | |||||||||||||||||
| Non-interest income (loss) | 627 | 645 | 829 | |||||||||||||||||
| Net revenues | 5,181 | 5,404 | 5,247 | |||||||||||||||||
| Benefit (provision) for credit losses | (1,796) | (307) | 243 | |||||||||||||||||
| Non-interest expense | ||||||||||||||||||||
| Salaries and employee benefits | (387) | (376) | (352) | |||||||||||||||||
| Credit enhancement expense | (542) | (558) | (386) | |||||||||||||||||
| Benefit for (decrease in) credit enhancement recoveries | 210 | (1) | (60) | |||||||||||||||||
| Legislative assessments expense | (753) | (748) | (734) | |||||||||||||||||
| Other expense | (353) | (337) | (312) | |||||||||||||||||
| Non-interest expense | (1,825) | (2,020) | (1,844) | |||||||||||||||||
| Income (loss) before income tax (expense) benefit | 1,560 | 3,077 | 3,646 | |||||||||||||||||
| Income tax (expense) benefit | (247) | (624) | (727) | |||||||||||||||||
| Net income (loss) | 1,313 | 2,453 | 2,919 | |||||||||||||||||
| Other comprehensive income (loss), net of taxes and reclassification adjustments | (181) | (66) | (10) | |||||||||||||||||
| Comprehensive income (loss) | $1,132 | $2,387 | $2,909 | |||||||||||||||||
| Net income (loss) | $1,313 | $2,453 | $2,919 | |||||||||||||||||
| Future increase in senior preferred stock liquidation preference | (1,132) | (2,387) | (2,909) | |||||||||||||||||
| Net income (loss) attributable to common stockholders | $181 | $66 | $10 | |||||||||||||||||
| Net income (loss) per common share | $0.06 | $0.02 | $0.00 | |||||||||||||||||
| Weighted average common shares (in millions) | 3,234 | 3,234 | 3,234 | |||||||||||||||||
Freddie Mac Third Quarter 2022 Financial Results
November 8, 2022
Page 10
FREDDIE MAC
Condensed Consolidated Balance Sheets (Unaudited)
| September 30, | December 31, | |||||||||||||
(In millions, except share-related amounts) | 2022 | 2021 | ||||||||||||
| Assets | ||||||||||||||
Cash and cash equivalents (includes $773 and $1,695 of restricted cash and cash equivalents) | $5,691 | $10,150 | ||||||||||||
| Securities purchased under agreements to resell | 97,643 | 71,203 | ||||||||||||
| Investment securities, at fair value | 43,270 | 53,015 | ||||||||||||
Mortgage loans held-for-sale (includes $3,542 and $10,498 at fair value) | 9,365 | 19,778 | ||||||||||||
Mortgage loans held-for-investment (net of allowance for credit losses of $6,851 and $4,947) | 2,998,008 | 2,828,331 | ||||||||||||
| Accrued interest receivable, net | 8,201 | 7,474 | ||||||||||||
| Deferred tax assets, net | 5,561 | 6,214 | ||||||||||||
Other assets (includes $6,008 and $6,594 at fair value) | 22,917 | 29,421 | ||||||||||||
| Total assets | $3,190,656 | $3,025,586 | ||||||||||||
| Liabilities and equity | ||||||||||||||
| Liabilities | ||||||||||||||
| Accrued interest payable | $6,915 | $6,268 | ||||||||||||
Debt (includes $4,252 and $2,478 at fair value) | 3,137,222 | 2,980,185 | ||||||||||||
Other liabilities (includes $961 and $287 at fair value) | 11,289 | 11,100 | ||||||||||||
| Total liabilities | 3,155,426 | 2,997,553 | ||||||||||||
| Commitments and contingencies | ||||||||||||||
| Equity | ||||||||||||||
Senior preferred stock (liquidation preference of $106,746 and $97,959) | 72,648 | 72,648 | ||||||||||||
| Preferred stock, at redemption value | 14,109 | 14,109 | ||||||||||||
Common stock, $0.00 par value, 4,000,000,000 shares authorized, 725,863,886 shares issued and 650,059,553 shares outstanding | — | — | ||||||||||||
| Retained earnings (accumulated deficit) | (47,429) | (54,993) | ||||||||||||
| AOCI, net of taxes, related to: | ||||||||||||||
| Available-for-sale securities | (77) | 297 | ||||||||||||
| Other | (136) | (143) | ||||||||||||
| Total AOCI, net of taxes | (213) | 154 | ||||||||||||
Treasury stock, at cost, 75,804,333 shares | (3,885) | (3,885) | ||||||||||||
| Total equity | 35,230 | 28,033 | ||||||||||||
| Total liabilities and equity | $3,190,656 | $3,025,586 | ||||||||||||
The table below presents the carrying value and classification of the assets and liabilities of consolidated variable interest entities (VIEs) on the company's condensed consolidated balance sheets. | ||||||||||||||
| September 30, | December 31, | |||||||||||||
| (In millions) | 2022 | 2021 | ||||||||||||
| Assets: | ||||||||||||||
Cash and cash equivalents (includes $677 and $1,595 of restricted cash and cash equivalents) | $678 | $1,596 | ||||||||||||
| Securities purchased under agreements to resell | 15,500 | 34,000 | ||||||||||||
| Investment securities, at fair value | 309 | 420 | ||||||||||||
| Mortgage loans held-for-investment, net | 2,956,534 | 2,784,626 | ||||||||||||
| Accrued interest receivable, net | 7,721 | 7,019 | ||||||||||||
| Other assets | 6,439 | 11,265 | ||||||||||||
| Total assets of consolidated VIEs | $2,987,181 | $2,838,926 | ||||||||||||
| Liabilities: | ||||||||||||||
| Accrued interest payable | $6,449 | $5,823 | ||||||||||||
| Debt | 2,973,973 | 2,803,054 | ||||||||||||
| Total liabilities of consolidated VIEs | $2,980,422 | $2,808,877 | ||||||||||||
© Freddie Mac Third Quarter 2022 Financial Results Supplement November 8, 2022 Exhibit 99.2
© Freddie Mac 2 Financial Highlights $5.2 $5.6 $5.8 $5.4 $5.2 $2.9 $2.7 $3.8 $2.5 $1.3 Net revenues Net income 3Q21 4Q21 1Q22 2Q22 3Q22 Net revenues and net income $ Billions ▪ Net income of $1.3 billion for the third quarter of 2022, a decrease of 55% year-over-year, primarily driven by a credit reserve build in Single-Family. ▪ Net revenues of $5.2 billion for the third quarter of 2022, a decrease of 1% year-over-year, as higher net interest income in Single-Family was offset by a decline in non-interest income in Multifamily.
© Freddie Mac 3 $3,086 $3,207 $3,299 $3,343 $3,387 $2,682 $2,792 $2,884 $2,928 $2,971 $404 $415 $415 $415 $416 Single-Family mortgage portfolio Multifamily mortgage portfolio 09/30/21 12/31/21 03/31/22 06/30/22 09/30/22 Mortgage Portfolio Balances Mortgage portfolio1 UPB in $ Billions 10% YoY increase 3% YoY increase 11% YoY increase ▪ Total mortgage portfolio increased 10% year-over-year to $3.4 trillion, driven by an 11% increase in the Single- Family mortgage portfolio and a 3% increase in the Multifamily mortgage portfolio.
© Freddie Mac 4 $35.2 $106.7 $140.2 Net worth Senior preferred stock liquidation preference Remaining Treasury funding commitment As of September 30, 2022 Conservatorship Matters Pursuant to the Purchase Agreement, Freddie Mac will not be required to pay a dividend to Treasury until it has built sufficient capital to meet the capital requirements and buffers set forth in the Enterprise Regulatory Capital Framework (ERCF). Draws and dividend payments $ Billions Net worth, liquidation preference2, and Treasury funding commitment $ Billions $71.6 $119.7 Cumulative draws from Treasury Cumulative dividend payments to Treasury As of September 30, 2022
© Freddie Mac 5 543,000 637,000 539,000 349,000 372,000 4.7% 3.9% 3.6% 3.6% 3.5% Average monthly net new jobs (non-farm) National unemployment rate (as of the last month in each quarter) 3Q21 4Q21 1Q22 2Q22 3Q22 National home prices increased by an average of 8.9% over the past year Quarterly ending interest rates 3.01% 3.11% 4.67% 5.70% 6.70% 1.57% 1.57% 2.37% 3.05% 3.83% 0.05% 0.05% 0.16% 1.09% 2.47% 30-year mortgage rate, based on Primary Mortgage Market Survey (PMMS) 10-year LIBOR SOFR 09/30/21 12/31/21 03/31/22 06/30/22 09/30/22 169 271 United States (Seasonally Adjusted) 2017 2018 2019 2020 2021 2022 Freddie Mac House Price Index (December 2000 = 100) National home prices since 2017 Unemployment rate and job creation Key Economic Indicators SOFR interest rates are 30-day average rates.
© Freddie Mac 6 $2,682 $2,792 $2,884 $2,928 $2,971 3Q21 4Q21 1Q22 2Q22 3Q22 0.76% 0.81% 0.73% 0.81% 0.79% 0.20% 0.20% 0.20% 0.19% 0.20% 1.46% 1.12% 0.92% 0.76% 0.67% One month past due Two months past due Seriously delinquent 3Q21 4Q21 1Q22 2Q22 3Q22 $299 $271 $207 $138 $121 $132 $111 $93 $86 $98 $167 $160 $114 $52 $23 48 47 49 52 54 Home purchase Refinance 3Q21 4Q21 1Q22 2Q22 3Q22 Single-Family Financial Highlights and Key Metrics $3.9 $4.7 $5.2 $4.9 $4.4 $2.0 $2.2 $3.4 $2.2 $0.8 Net revenues Net income 3Q21 4Q21 1Q22 2Q22 3Q22 Net revenues and net income $ Billions Guarantee fees charged on new acquisitions (bps)3 11% YoY increase Mortgage portfolio UPB in $ Billions Delinquency rates New business activity UPB in $ Billions
© Freddie Mac 7 72% 71% 72% 75% 78% 3Q21 4Q21 1Q22 2Q22 3Q22 44% 41% 45% 62% 80% 26% 31% 33% 28% 16%30% 28% 22% 10% 4% Home purchase Cash-out refinance Other refinance 3Q21 4Q21 1Q22 2Q22 3Q22 750 748 746 744 747 3Q21 4Q21 1Q22 2Q22 3Q22 12% 13% 15% 17% 19% 3Q21 4Q21 1Q22 2Q22 3Q22 New business activity with debt-to-income ratio > 45% Weighted average original loan-to-value ratio (OLTV) Weighted average original credit score Single-Family Loan Purchase Credit Characteristics Loan purpose
© Freddie Mac 8 UPB covered by new CRT issuance $ Billions $167 $242 $208 $151 $136 3Q21 4Q21 1Q22 2Q22 3Q22 Mortgage portfolio with credit enhancement UPB in $ Billions $1,345 $1,491 $1,594 $1,726 $1,803 50% 53% 55% 59% 61% UPB Percentage 09/30/21 12/31/21 03/31/22 06/30/22 09/30/22 Single-Family Credit Risk Transfer
© Freddie Mac 9 $18 $25 $15 $15 $14 3Q21 4Q21 1Q22 2Q22 3Q22 0.12% 0.13% 0.30% 0.18% 1.30% 0.99% 0.00% 0.00% Freddie Mac (60+ day) FDIC insured institutions (90+ day) MF CMBS market (60+ day) ACLI investment bulletin (60+ day) 3Q21 4Q21 1Q22 2Q22 3Q22 Multifamily market and Freddie Mac delinquency rates $404 $415 $415 $415 $416 4,624 4,652 4,616 4,562 4,523 Mortgage portfolio Total unit count (in thousands) 3Q21 4Q21 1Q22 2Q22 3Q22 Multifamily Financial Highlights and Key Metrics Net revenues and net income $ Billions $1.3 $0.9 $0.6 $0.5 $0.8 $0.9 $0.5 $0.4 $0.3 $0.5 Net revenues Net income 3Q21 4Q21 1Q22 2Q22 3Q22 (89 %) New business activity $ Billions Mortgage portfolio UPB in $ Billions 3%YoY increase The delinquency rates for FDIC insured institutions and ACLI investment bulletin are as of June 30, 2022 (latest available information). New business activity subject to the FHFA loan purchase cap of $70 billion for 2021 and $78 billion for 2022.
© Freddie Mac 10 Acquisitions of units by area median income (AMI) (% of eligible units acquired) 36% 25% 53% 53% 44% 32% 32% 28% 27% 31% 26% 34% 16% 17% 21% 6% 9% 3% 3% 4% ≤60% >60% to ≤80% >80% to ≤120% >120% 3Q21 4Q21 1Q22 2Q22 3Q22 1.35 1.33 1.33 1.33 1.31 67% 67% 67% 63% 59% Weighted average ODSCR Weighted average OLTV ratio 3Q21 4Q21 1Q22 2Q22 3Q22 Multifamily New Business Characteristics (89 %) Weighted average original debt service coverage ratio (ODSCR) and weighted average OLTV ratio
© Freddie Mac 11 $380 $389 $389 $397 $394 94% 94% 94% 96% 95% UPB Percentage 09/30/21 12/31/21 03/31/22 06/30/22 09/30/22 Mortgage portfolio with credit enhancement UPB in $ Billions $18 $23 $14 $21 $11 3Q21 4Q21 1Q22 2Q22 3Q22 Multifamily Credit Risk Transfer UPB covered by new CRT issuance $ Billions
© Freddie Mac 12 73 62 49 37 28 22 17 10 8 6 45 39 23 16 12 6 6 16 13 10 Forbearance and other Payment deferral plans Loan modifications 3Q21 4Q21 1Q22 2Q22 3Q22 Number of families Freddie Mac helped to own or rent a home4 In Thousands Housing Market Support 1,188 1,178 834 616 542 612 598 412 205 95 415 357 279 263 297 161 223 143 148 150 Single-Family refinance borrowers Single-Family home purchase borrowers Multifamily rental units 3Q21 4Q21 1Q22 2Q22 3Q22 Other includes repayment plans and foreclosure alternatives. 6 Number of Single-Family loan workouts5 In Thousands 6 6 First quarter and second quarter 2022 Multifamily rental units revised to reflect updated information.
© Freddie Mac 13 Endnotes 1 Based on unpaid principal balances (UPB) of securitized mortgage loans, unsecuritized mortgage loans, and other, which primarily consists of other mortgage-related guarantees. 2 Includes the initial $1 billion liquidation preference of the senior preferred stock issued to Treasury in September 2008, the $71.6 billion of draws from Treasury, and the $34.1 billion in increases to our Net Worth Amount pursuant to the Purchase Agreement. 3 Represents the estimated average rate of guarantee fees for new acquisitions during the period assuming amortization of upfront fees using the estimated life of the related loans rather than the original contractual maturity date of the related loans. Net of legislated 10 basis point fee remitted to Treasury pursuant to the Temporary Payroll Tax Cut Continuation Act of 2011 as extended by the Infrastructure Investment and Jobs Act. 4 Based on the company’s purchases of loans and issuances of mortgage-related securities. For the periods presented, a borrower may be counted more than once if the company purchased more than one loan (purchase or refinance mortgage) relating to the same borrower. 5 Consists of both home retention actions and foreclosure alternatives. 6 Categories are not mutually exclusive, and a borrower in one category may also be included in another category in the same or another period. For example, a borrower helped through a home retention action in one period may subsequently lose his or her home through a foreclosure alternative in a later period.
© Freddie Mac 14 Safe Harbor Statements Freddie Mac obligations Freddie Mac’s securities are obligations of Freddie Mac only. The securities, including any interest or return of discount on the securities, are not guaranteed by and are not debts or obligations of the United States or any federal agency or instrumentality other than Freddie Mac. No offer or solicitation of securities This presentation includes information related to, or referenced in the offering documentation for, certain Freddie Mac securities, including offering circulars and related supplements and agreements. Freddie Mac securities may not be eligible for offer or sale in certain jurisdictions or to certain persons. This information is provided for your general information only, is current only as of its specified date and does not constitute an offer to sell or a solicitation of an offer to buy securities. The information does not constitute a sufficient basis for making a decision with respect to the purchase or sale of any security. All information regarding or relating to Freddie Mac securities is qualified in its entirety by the relevant offering circular and any related supplements. Investors should review the relevant offering circular and any related supplements before making a decision with respect to the purchase or sale of any security. In addition, before purchasing any security, please consult your legal and financial advisors for information about and analysis of the security, its risks and its suitability as an investment in your particular circumstances. Forward-looking statements Freddie Mac's presentations may contain forward-looking statements, which may include statements pertaining to the conservatorship, the company’s current expectations and objectives for its Single-Family and Multifamily segments, its efforts to assist the housing market, liquidity and capital management, economic and market conditions and trends including, but not limited to, changes in observed and forecasted house price appreciation, its market share, the effect of legislative and regulatory developments and new accounting guidance, the credit quality of loans the company owns or guarantees, the costs and benefits of the company’s CRT transactions, the effects of natural disasters, other catastrophic events, including the effects of the COVID-19 pandemic, and significant climate change effects and actions taken in response thereto on its business, results of operations, and financial condition. Forward-looking statements involve known and unknown risks and uncertainties, some of which are beyond the company’s control. Management’s expectations for the company’s future necessarily involve a number of assumptions, judgments, and estimates, and various factors, including changes in market conditions, liquidity, mortgage spreads, credit outlook, actions by the U.S. government (including FHFA, Treasury, and Congress) and state and local governments, changes in the fiscal and monetary policies of the Federal Reserve, uncertainty about the duration, severity, and effects of the COVID-19 pandemic and actions taken in response thereto, and the impacts of legislation or regulations and new or amended accounting guidance, that could cause actual results to differ materially from these expectations. These assumptions, judgments, estimates and factors are discussed in the company’s Annual Report on Form 10-K for the year ended December 31, 2021, Quarterly Reports on Form 10-Q for the quarters ended March 31, 2022, June 30, 2022, and September 30, 2022, and Current Reports on Form 8-K, which are available on the Investor Relations page of the company’s website at www.freddiemac.com and the SEC’s website at www.sec.gov. The company undertakes no obligation to update forward-looking statements it makes to reflect events or circumstances occurring after the date of this presentation.