Freddie Mac at Mid-year: Meeting Our Commitment to the Housing Market, Taxpayers
Yesterday, Freddie Mac announced second quarter net income of $5 billion, marking our seventh consecutive quarter of net income profitability and the second-largest quarterly net income in our company's history. Clearly, our outstanding financial results are benefitting from the turnaround in housing, as well as the improvements we continue to make in our business.
These latest results underscore our commitment to supporting the nation's housing market and minimizing losses for taxpayers. Let me highlight just a few of the ways in which the numbers reflect our ongoing commitment.
Taxpayers Benefit From Freddie Mac's Profitability
Our return to profitability has significantly increased our ability to return value to the taxpayers. Including $4.4 billion due in September, we will have paid more than $17 billion to Treasury in 2013 alone and approximately $41 billion since the start of Conservatorship. That's 57 percent of what the company had drawn previously, though it's important to note that dividends do not reduce the $72 billion in preferred stock held by Treasury.
Our Focus on Foreclosure Prevention, Sustainable Homeownership, and a Vibrant Rental Housing Market Benefits Families and Communities Nationwide
In just the first half of this year, we helped 87,000 struggling borrowers avoid foreclosure. This reflects our aggressive efforts to address problem loans and is strong evidence that our foreclosure avoidance programs, which we are continually enhancing, are taking hold. For example, short sale activity as a percentage of combined total short sale and foreclosures increased from 31 percent in the first half of 2012 to 42 percent in the first half of 2013 due to the introduction of our revamped short sale program late last year.
Of course, foreclosure prevention is only one part of our commitment to supporting the housing market. Another is helping America's families own or rent a home.
For the past several years, we've been strongly focused on what we call “sustainable homeownership” – responsible lending practices that protect homeowners, and therefore taxpayers, by ensuring families can afford their mortgages for the long-term. Recognizing that one-third of America's families rent rather than own, we've also created a vigorous multifamily business that's making a difference in underserved rental markets across the country.
In the first half of 2013, we provided $276 billion in funding to the mortgage market – bringing the total to more than $2 trillion since 2009, which helped nearly 10.4 million families buy, refinance, or rent a home.
Lower Delinquency Rates Reflect Our Strong New Book of Business
We're building an extremely high-quality new book of business that represents an increasing share of our total portfolio. Our post-2008 loans grew to 70 percent of the single-family credit guarantee portfolio during the second quarter. Full disclosure: 20 percent of the book is composed of relief refinancings, including HARP loans, which tend to have higher delinquency rates.
Largely as a result of this focus on sustainable homeownership and loan quality, our overall seriously delinquent rates are continuing to trend lower. Our single-family delinquency rate dropped to 2.79 percent during the second quarter – a 24-basis point decrease. While it's still high by historical standards, it's at the lowest level since mid-2009 and well below the industry average of 6.39 percent.
And we continue to have an extremely low delinquency rate in our multifamily business – .09 percent in the second quarter – underscoring the underlying strength in the multifamily market and the excellent underlying credit risk of our book of business.
Our Innovations Will Benefit the Future Housing Finance System
Finally, we're continuing to work with the Federal Housing Finance Agency (FHFA), our customers, and the industry to build a stronger housing finance system for the nation. In addition to enhancing transparency and promoting standardization, we're working on new ways to share credit risk and bring private capital back into the market.
A few weeks ago, Freddie Mac achieved a significant first: we closed a distinctive and well-received single-family credit risk-sharing transaction with the issuance of $500 million of Structured Agency Credit Risk (STACR(SM)) debt notes. The market response from a broadly diversified group of investors was overwhelmingly positive – a great first step in our effort to create a product that can become repeatable and scalable over time. We believe this puts the company well on its way to meeting the goal set by FHFA for 2013 of executing risk-transfer transactions with at least $30 billion of unpaid principal balances.
So we're making very good progress at Freddie Mac. Our focus for the remainder of 2013 is to continue meeting our commitment to help families own or rent a home, assist troubled borrowers avoid foreclosure, return value to taxpayers, support our lender customers, and build a stronger foundation for the future.
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