Freddie Mac today reported net income of $7.8 billion for the full-year 2016, compared to net income of $6.4 billion for the full-year 2015. The company also reported comprehensive income of $7.1 billion for the full-year 2016, compared to comprehensive income of $5.8 billion for the full-year 2015.
The increase in the company’s full-year 2016 results was primarily driven by solid business results, as the company benefited from higher single-family guarantee fee income driven by amortization of upfront fees, and two market-related items. These are Net Interest Rate Effect, which produced $0.3 billion (after-tax), and Spread Change Effect, producing $0.1 billion (after-tax).
“2016 marked Freddie Mac’s fifth consecutive year of profitability, reflecting not only an improving economy but also the very successful work we have done to transform the company,” said Donald H. Layton, CEO of Freddie Mac. “Our single-family business continues to grow, and we were once again the nation’s leading multifamily lender. We have the best overall credit quality in nearly a decade. Additionally, we are the leading innovator in credit risk transfer and the efficient reduction of legacy assets – enabling us to systematically reduce taxpayer exposure to mortgage risks.”
The GSE sold $3.1 billion of seriously delinquent and $1.1 billion of performing modified and re-performing single-family loans. Cumulatively sold were $7.7 billion in seasoned single-family mortgage loans since 2013. In addition, $8.1 billion of single-family non-agency mortgage-related securities were sold. Since 2013, Freddie has sold $36.1 billion in legacy assets.
“Alongside these improvements, we are more effectively delivering on our community mission each year – with new products and programs which increase access to credit for more homebuyers and which fund affordable rental housing across the nation,” Layton said.
Comprehensive income was driven by solid business results, as the company benefited from higher guarantee fee revenues: $0.4 billion (after-tax) estimated market-related gains, as quarterly volatility had minimal effect on full-year results. There was a $0.1 billion (after-tax) estimated gain due to market spreads tightening, with a $0.3 billion (after-tax) estimated gain due to a modest increase in longer-term interest rates.
Freddie Mac reported a comprehensive income of $3.9 billion driven by solid business results and $2.3 billion of market-related gains in Q4, primarily driven by a significant increase in longer-term interest rates during the quarter. The company continues to manage its interest-rate risk to low levels on an economic basis, as evidenced by its duration gap, which measured near zero months at year end 2016.