Freddie Mac [1] released its Q2 financial results [2] on Tuesday, announcing $2.5 billion in net income and $2.4 billion in comprehensive income for the quarter. The GSE attributed the earnings to “strong business revenues,” which it reported at $334 million pre-tax, and “favorable litigation judgment,” referencing a final judgment of $264 million post-tax against Nomura Holding America, Inc.
The GSE [3] said its income has “remained relatively stable over the last several quarters despite market volatility.”
Freddie Mac will pay $1.6 billion in dividends to the U.S. Treasury [4], the amount it earned in excess of its $3.0 billion capital reserve requirement. In the first quarter of the year, Freddie was forced to draw from the Treasury as its capital reserve was below the $3.0 billion mark. Cumulatively, however, Freddie reports paying $40.8 billion more back to the Treasury than it has received since the initial bailout in 2008. The GSE has paid $112.4 billion to the Treasury in dividends compared to the $71.6 billion it received in assistance.
“Freddie Mac’s transformation continued in the second quarter, with good business results and similarly good financial performance,” said Donald H. Layton, CEO at Freddie Mac. “In business operations, our guarantee book grew significantly, credit quality was high, and we are generating a consistent stream of new innovations for our customers.”
New single-family home loan originations increased 29 percent over the year in Q2, reaching $84 billion. New multifamily loan originations increased 13 percent, totaling $16 billion for the quarter. Delinquencies [5] remained low among both loan categories. Freddie Mac’s single-family serious delinquency rate for the second quarter was 0.82 percent, its lowest rate since early 2008. The multifamily delinquency rate was 0.01 percent.
Freddie Mac has transferred some of its credit risk on more than $1 trillion in single-family mortgage loans, according to its earnings report, and the GSE plans to continue risk-transfer transactions for loans originated in the second quarter. Freddie has also transferred “a large majority of credit risk” on its multifamily loans.
Over the second quarter, Freddie provided $103 billion in liquidity to the mortgage market, funding almost 362,000 single-family homes and 191,000 rental units. About 87 percent of the multifamily rental units Freddie Mac financed were affordable to households earning below the median income in their area.
Freddie Mac also reported that first-time homebuyers made up 46 percent of its new purchase loans originated in the second quarter, the highest level reported within the past 10 years.
You can read the full transcript of the earnings call with Layton here [6].