A week late, Freddie Mac releases Q4 2022 results

A week after canceling its quarterly earnings results without explanation, Freddie Mac on Wednesday disclosed a net profit of $1.76 billion in the fourth quarter.

That figure was a sequential gain on the $1.3 billion in net income recorded in the third quarter of 2022, though it represented a 36% decline from a year prior.

Executives at the government sponsored enterprise primarily attributed the drop from last year to lower net revenues and a credit reserve build in its single-family business.

Net revenues for the fourth quarter totaled $4.8 billion, down 13% year-over-year, driven by a decline in both non-interest and net interest income. Fourth quarter non-interest income of $200 million was down 70% year-over-year, primarily driven by a decline in net investment gains in both single-family and multifamily. Those net investment gains resulted from lower gains on single-family held-for-sale loans due to lower volumes and on new loan purchases and securitizations in multifamily due to lower volumes and margins.

“In a year with significant volatility and a challenging macroeconomic environment, Freddie Mac made home possible for 2.5 million families, while delivering solid financial results,” Freddie Mac CEO Michael DeVito said in a statement. “Looking ahead, we expect to place even more emphasis on our mission by further advancing our affordable, sustainable, and equitable housing plans without compromising safety and soundness. We expect to accomplish these objectives by leveraging our talented workforce, collaborating with market participants to find new solutions, and continuously working to effectively manage risk. These actions will enable Freddie Mac to continue to build financial strength and stability that is central to fulfilling our mission.”

According to Securities and Exchange filings, net interest income of $4.6 billion decreased 4% year-over-year, primarily driven by lower deferred fee income due to slower prepayments as a result of higher mortgage rates.

Provision for credit losses for the fourth quarter of 2022 came in at $600 million, up from $100 million in the fourth quarter of 2021. This was primarily driven by lower home values, partially offset by lower purchase volumes.

Non-interest expense for the fourth quarter was $20 billion, up $50 million year over year, primarily driven by higher credit enhancement expense due to a higher volume of outstanding credit risk transfer transactions and higher spreads on recent transactions.

In all, the total mortgage portfolio increased 6% year over year to $3.4 trillion, driven by a 7% increase in the single family mortgage portfolio and a 3% increase in the multifamily mortgage portfolio.

At the end of 2022, Freddie Mac had a net worth of $37 billion but was still undercapitalized in its Treasury funding commitment by $140.2 billion.

The government sponsored enterprise reported that it recorded net income of $9.3 billion and comprehensive income of $9 billion for the full year 2022, both of which declined 23% from the prior year.

Its fellow GSE, Fannie Mae, similarly saw its net income sink in 2022. Fannie’s net income fell to $12.9 billion in 2022 as the housing market declined, a steep drop from $22.1 billion in 2021.

Freddie executives on the earnings call Wednesday did not state why the call was abruptly canceled a week prior.