Progress in 2013 Sets the Stage for 2014
This week, Freddie Mac reported its fourth quarter and full-year 2013 financial results. Net income totaled $48.7 billion and comprehensive income was at $51.6 billion – both records for the company. The quarter was also a record for pre-tax income at $8.6 billion and marked our ninth consecutive quarter of positive earnings. However, it's important to note that our results included several legacy items that were strongly favorable in 2013, such as legal settlements, but it is our expectation that such items will be considerably smaller in 2014.
I want to highlight several areas of progress:
Supporting the Housing Market
The single-family business, our largest, continued to deliver on our commitment to the American homeowner and economy through its activities. We are extremely proud of this work as it had a significant impact on communities nationwide in 2013.
First, we continued to help distressed borrowers through alternatives to foreclosure and through relief financing activities. HAMP® and HARP are the most well-known of these efforts. Through these and our own proprietary programs, we helped more than 165,000 families avoid foreclosure last year. Second, we helped homeowners buy or refinance a home through our classic mortgage purchase and guarantee activities, which are an essential component of the country rebuilding homeownership on a sustainable basis. Last year, we funded one out of every four home loans and those who refinanced will save an average of $300 a month during the first12 months. And finally, we are supporting the rental market through our multifamily business, which continues to get stronger. We funded more than 360,000 apartments last year – importantly the majority of those were considered affordable which is a critical need for the country right now.
Preserving the Taxpayers' Investment
We are focused on preserving the taxpayers' investment. We're doing this by returning value to them through dividends, and our return to profitability has increased our ability to do so. With the dividend payment made in December, based upon third quarter 2013 results, we passed the much-watched benchmark of having paid into the Treasury more than we received from them in terms of support under the Preferred Stock Purchase Agreement. Based on the fourth quarter's earnings, we will increase the level of excess to $10.4 billion when we make our next dividend payment in March. However, the payments made in dividends do not reduce the balance of the preferred stock outstanding, which continues at $72.3 billion, the same level it has been since early 2012.
We are also preserving taxpayer value by reducing their exposure to risk. We do this in many ways with everything from settlements on various legacy issues to our foreclosure prevention programs. A particularly important way in which we're reducing taxpayer risk is through our innovative credit transfer transactions, through which we are putting private capital ahead of the taxpayer in taking first or predominant risk of loss on new mortgages. In the single-family business, we pioneered the market with both our STACR® transactions and our reinsurance transaction. Between both types of execution, we sold $1.2 billion of credit bonds into the market, laying off substantial credit risk on almost $45 billion in qualifying single-family mortgages. This is in addition to our innovative K-Deal structure in the multifamily business. We issued a record $28 billion of such securities last year.
Building a Stronger Infrastructure
Freddie Mac is also focused on building a stronger infrastructure for the future of mortgage finance in America under the leadership of the FHFA. The most prominent is the development of the Common Securitization Platform. Other examples include our progress in advancing loan quality through the Uniform Mortgage Data Program; the new origination representation and warranty framework; and better tools for our customers to use to improve the purchase certainty of loans they deliver to us.
Building a Better Company
Underlying all these efforts is our work to build a better company. This means a better quality of customer service, more capable systems and technology, higher-quality operating processes, and greater expense and capital efficiency.
In summary, our results in 2013 reflect very good progress at Freddie Mac. I said it last quarter and I'll say it again this quarter – we're a stronger and better-run company than we have been in years. This sets the stage for 2014, in which we'll continue to support the market, preserve the taxpayers' investment, and build for the future. Taken together, our work will help to strengthen the market and increase access to affordable mortgages for borrowers nationwide.
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