Yahoo Finance Federal Home Loan Mortgage Corp (FMCC) Q1 2024 Earnings Call Transcript Highlights: Strong ...
Release Date: May 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Net income increased by $771 million or 39% year-over-year, reaching $2.8 billion in the first quarter.
First-time homebuyers represented 52% of new single-family home purchase loans, indicating strong support for this demographic.
Net interest income rose by 6% year-over-year to $4.8 billion, driven by higher rates and growth in the single-family mortgage portfolio.
Multifamily segment reported a significant increase in net income, up $503 million from the prior year quarter, primarily due to higher noninterest income.
Provision for credit losses decreased significantly in both business segments compared to the prior year, indicating improved credit performance.
Negative Points
Higher mortgage rates have led to slower prepayments, impacting deferred fee income recognition.
The single-family serious delinquency rate, although historically low, showed a slight increase in the first quarter.
House price growth forecast has been revised downwards, indicating potential cooling in the housing market.
Refinance activity remains low due to higher mortgage rates, accounting for only 15% of total new business activity.
Multifamily delinquency rate increased to 34 basis points, up 21 basis points from the previous year, driven by delinquencies in floating rate loans and small business loans portfolio.
Q & A Highlights
Q: Can you provide an overview of Freddie Mac's financial performance in the first quarter of 2024? A (Christian Lown - CFO, EVP): We reported a net income of $2.8 billion, marking a 39% increase year-over-year. This was primarily driven by higher net investment gains and net interest income, which benefited from higher rates. Our net interest income rose to $4.8 billion, up 6% from the previous year.
Q: What initiatives has Freddie Mac introduced to support low and moderate-income families and first-time homebuyers? A (Christian Lown - CFO, EVP): We've enhanced our affordability toolkit for very low-income homebuyers, allowing families earning 50% or less of area median income to receive a $2,500 credit for closing costs or down-payments. Additionally, 52% of our new single-family home purchase loans were to first-time homebuyers.
Q: How has the single-family segment performed this quarter compared to the previous year? A (Christian Lown - CFO, EVP): The single-family segment reported a net income of $1.9 billion, up 16% year-over-year. Net revenues increased by 6% to $4.5 billion, driven by a 4% increase in net interest income and higher short-term interest rates. However, this was partially offset by lower deferred fee income due to slower prepayments.
Q: What are the current trends in house prices according to Freddie Mac's forecasts? A (Christian Lown - CFO, EVP): Our current house price forecast assumes an increase of 0.2% over the next 12 months and 0.6% over the subsequent 12 months. This is a decrease from our previous forecast, which assumed 2.8% and 2% growth over the same periods, respectively.
Q: Can you discuss the performance and outlook of the multifamily segment? A (Christian Lown - CFO, EVP): The multifamily segment reported a net income of $821 million, up significantly due to higher noninterest income and net gains from interest rate risk management activities. We financed 85,000 multifamily rental units, with 61% being affordable to low-income families. The multifamily mortgage portfolio grew by 4% year-over-year to $443 billion.
Q: What measures is Freddie Mac taking to manage risks and enhance its underwriting practices? A (Christian Lown - CFO, EVP): We've implemented multifamily policy and process changes, including enhanced property inspection requirements and appraisal reviews. These actions are part of our ongoing efforts to strengthen our underwriting due diligence and risk mitigation.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.