Yahoo Finance Freddie Mac Surpasses Analyst Revenue Forecasts with Strong Q1 2024 Performance
Net Income: Reported at $2.8 billion, marking a 39% increase year-over-year, surpassing the estimated $2.3 billion.
Revenue: Achieved $5.8 billion, up 19% year-over-year, exceeding the estimated $4.877 billion.
Provision for Credit Losses: Recorded at $0.2 billion, primarily due to a modest credit reserve build in Single-Family.
New Business Activity: Increased to $62 billion from $59 billion in the prior year's first quarter.
Mortgage Portfolio: Grew to $3.0 trillion, a 2% increase year-over-year.
Delinquency Rate: Improved to 0.52% from 0.62% as of March 31, 2023.
Loan Workouts: Completed approximately 21,000, aiding in the management of delinquencies.
On May 1, 2024, Federal Home Loan Mortgage Corp (FMCC), also known as Freddie Mac, released its 8-K filing, revealing a significant increase in net income and revenue for the first quarter of 2024. The company reported a net income of $2.8 billion, marking a 39% increase from the previous year, and net revenues of $5.8 billion, up 19% year-over-year. These figures substantially exceeded analyst expectations, which had forecasted a net income and revenue of $0.00 million and $4877.00 million respectively.
Freddie Mac, a cornerstone of the American housing finance system, plays a pivotal role by purchasing, guaranteeing, and securitizing mortgages. It operates primarily through its Single-family and Multifamily segments, with the majority of revenue derived from the Single-family sector. This quarter's performance highlights the company's effective management and operational efficiency, particularly in a challenging economic environment characterized by high interest rates and affordability issues.
Key Financial Highlights
The first quarter saw Freddie Mac's total mortgage portfolio rise to $3.5 trillion, with a notable increase in net interest income to $4.8 billion, up 6% from the previous year. This growth was driven by an expanding mortgage portfolio and higher investments net interest income due to increased short-term interest rates. Non-interest income also surged to $1.0 billion from $0.3 billion in the prior year, primarily due to net investment gains in the Multifamily segment.
The provision for credit losses was $0.2 billion, a slight increase attributed to a modest credit reserve build in the Single-family segment due to new acquisitions and rising mortgage interest rates. Despite these challenges, the company's serious delinquency rate improved, dropping to 0.52% from 0.62% a year earlier, reflecting strong credit performance and effective risk management.
Operational Achievements and Market Impact
During the quarter, Freddie Mac financed 194,000 mortgages and supported 85,000 rental units, with a significant focus on affordability. 54% of the single-family homes and 90% of the rental units financed were affordable to families earning at or below 120% of the area median income. This underscores Freddie Mac's commitment to its mission of making home ownership and rental options accessible to more Americans, particularly low- to moderate-income families.
The company's efforts to enhance liquidity and stability in the housing market are evident in its new business activities, which totaled $62 billion, up from $59 billion in the same quarter the previous year. Additionally, Freddie Mac's strategic use of credit enhancements covered 61% of its mortgage portfolio, further securing its financial footing and protecting against potential losses.
Looking Ahead
As Freddie Mac continues to navigate the complexities of the housing market and broader economic conditions, its strong first-quarter performance provides a solid foundation for future growth. The company remains focused on its mission to stabilize the housing market and provide continued support to homeowners and renters across the United States.
For more detailed information on Freddie Mac's financial results and operational strategies, investors and interested parties are encouraged to review the full earnings report and supplementary materials available on the company's website.
Explore the complete 8-K earnings release (here) from Federal Home Loan Mortgage Corp for further details.
This article first appeared on GuruFocus.
