"We had a solid quarter… but there's a lot more work to be done," says CEO
Freddie Mac has shown resilience in the first quarter of 2023 despite a cooling housing market and uncertainty in the banking sector.
The government-sponsored enterprise reported a modest net income of $2.05 billion this quarter, a $1.79 billion increase from the previous quarter. However, that was down 47% from the same period in 2022, just before the Federal Reserve began its series of rate hikes.
Net revenues remained relatively unchanged from the fourth quarter at $4.83 billion. Similarly with Fannie Mae, Freddie's provision for credit losses decreased in the first quarter to $395 million, driven by modest credit reserve builds in both business segments. Lower credit loss provision and a $110 million decline in non-interest boosted net income in Q1.
"We had a solid quarter, earning $2 billion with no significant impact on our earnings or balance sheet from the recent banking industry disruption. Solid earnings also increased our net worth by more than $2 billion to $39.1 billion," Freddie Mac CEO Michael DeVito said in the GSE's earnings call. "Our performance during the quarter was partly the result of steps we've taken these past 15 years to focus on the safety and soundness of our enterprise, particularly with respect to credit risk."
At the end of the quarter, its total mortgage portfolio increased 4% year over year to $3.4 trillion. Meanwhile, new single-family business has declined from $207 billion annually to just $59 billion as home purchase and refinance activity slowed due to higher mortgage rates.
Its multifamily segment saw a 60% year-over-year slump in new business activity, down to $6 billion, as higher rates and market turmoil weakened multifamily demand.
"Freddie Mac's solid performance in the first quarter helped promote sustainable homeownership and rental opportunities across the nation… but there's a lot more work to be done," DeVito said. "In an uncertain economic environment, we remain focused on our mission and will continue to serve as a stabilizing force for the housing finance system."
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