Freddie Mac has had its finest quarter for purchasing mortgages since 2010

Freddie Mac had its best quarter in buying single-family home mortgages since at least 2010, said CEO Michael DeVito.

And although the refinancing volume was down compared to the previous quarters, "it is still one of the best quarters for refinancing that we have had in our history," said DeVito on a conference call on Friday. "Both purchase loans and refinancing loans will remain at around twice the volume before the pandemic."

Freddie Mac bought $ 299 billion worth of single family loans, up from $ 289 billion in the second quarter but less than $ 337 billion in the third quarter of 2020.

Acquisitions totaled $ 132 billion in the third quarter, compared to $ 98 billion in the second quarter and $ 101 billion in the third quarter of 2020. Refinancing was $ 167 billion, compared to $ 190 billion. In the second quarter and $ 236 billion in the third quarter last year.

Freddie Mac reported net income of $ 2.9 billion, down from $ 3.7 billion in the second quarter but down from $ 2.5 billion in the third quarter of 2020.

The year-on-year change was mainly due to higher net income and a release of credit reserves in the single-family business.

It ended the third quarter with net assets of $ 25.3 billion, an increase of 13% from the end of the second quarter and 82% from September 30, 2020 Agency had amended the Perpetual Stock Purchase Agreements and the Net Worth sweep away.

"The realized hike in house prices and improving economic conditions resulted in the release of $ 243 million in loan reserves for the quarter, resulting in a lower $ 194 million in loan-related expenses," said Chief Financial Officer Chris Lown in the conference call. "That was a drop of $ 614 million in the third quarter of 2020, driven by the negative effects of the COVID-19 pandemic."

Net sales were $ 5.2 billion, down from $ 5.9 billion in the previous quarter, but up from $ 5.1 billion last year. Net interest income, the driver of the increase in net income in the second quarter of 2021, rose 28% over that period to 4.4 billion from 3 basis points, Lown said.

However, the release of reserves was partially offset by higher credit enhancement expenses. Half of Freddie Mac's single-family portfolio was covered by credit enhancement at the end of the third quarter, Lown said.

The net income of a family, which makes up the bulk of Freddie Mac's revenues, was $ 2 billion, down from $ 2.9 billion in the second quarter, but down from $ 1.3 billion in the third quarter of 2020.

The multi-family net income, on the other hand, was higher than in the second quarter, but lower than in the previous year. Freddie Mac reported $ 891 million for this segment in the third quarter, compared to $ 824 million in the second quarter and $ 1.2 billion in the third quarter of 2020.

"Lower net investment income drove the decrease [year-over-year] due to lower market spread gains and lower initial price margin gains on new loan commitments," said Lown. "Apartment buildings have seen $ 45 billion in new business year-to-date, down $ 3 billion from the same period last year due to a lower credit purchase cap."

Earlier this month, acting FHFA director Sandra Thompson raised the multi-family ceiling to $ 78 billion for next year and Freddie Mac is positioning himself to buy more of those loans, DeVito said.

The Freddie Mac single-family mortgage default rate fell to 1.46% on September 30, from a pandemic high of 3.04% a year earlier. Approximately 1.15% of its portfolio by loan count remained on forbearance at the end of the third quarter, up from 2.95% on September 30, 2020.

Regarding Freddie Mac's credit risk transfer program, DeVito noted that the company made its first tender offer for its structured credit risk bonds from agencies from the eight issues between 2015 and 2017 with a cap of over $ 1.6 billion of original capital .

"This move effectively reduces the costs associated with credit risk transfer by buying back STACR tranches that no longer provide economic benefits," he said.

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