Freddie Mac : Press Release, 02/11/21

Freddie Mac Reports Net Income of $7.3 Billion and Comprehensive Income of $7.5 Billion for Full-Year 2020

Full-Year 2020 Financial Results

• • Net income of $7.3 billion, up $0.1 billion, and comprehensive income of $7.5 billion, down $0.3 billion, from 2019, primarily driven by higher net revenues, partially offset by higher provision for credit losses.

• • Total equity/net worth(1) increased to $16.4 billion, from $9.1 billion at December 31, 2019.

Fourth Quarter 2020 Financial Results

• • Net income of $2.9 billion and comprehensive income of $2.5 billion, up $0.4 billion and $0.1 billion, respectively, from the prior quarter, driven by a reserve release due primarily to realized house price growth during 4Q 2020.

"In 2020, Freddie Mac continued to serve the important role for which it was founded: supporting the housing market in all economic conditions. In the face of extraordinary economic uncertainty caused by COVID-19, we provided record liquidity, enabling millions of borrowers to purchase or refinance homes at historically low interest rates. We also helped hundreds of thousands of homeowners and renters affected by the pandemic avoid foreclosure and eviction. Our efforts are a testament to our people, our operating platform, our Conservator, and our many partners across the industry."

Christian M. Lown Chief Financial Officer

• • On January 14, 2021, FHFA, as Conservator, acting on behalf of Freddie Mac, entered into an agreement with Treasury that, among other items, allows Freddie Mac to continue to build capital by retaining earnings until it meets certain requirements in the Enterprise Regulatory Capital Framework (ERCF) and places additional restrictions on certain of its business activities.(2)

Providing Stability to the Housing Market, While Fulfilling Affordable Housing Mission(3)

• • Continued to provide mortgage-relief options for borrowers affected by the COVID-19 pandemic, including forbearance programs for both single-family and multifamily borrowers.

• • Extended moratorium on foreclosures and evictions until at least March 31, 2021.

• • Extended temporary measures designed to provide flexibility to homeowners, sellers, and appraisers to expedite loan closings during the COVID-19 pandemic.

Executing on Business Fundamentals

• • Single-Family new business activity of $1.1 trillion, up 141% from the prior year, reflecting higher home purchase and refinance activity.

• • Multifamily new business activity of $83 billion, up 6% from the prior year.

• • Single-Family and Multifamily guarantee portfolios grew 17% and 15%, respectively, year over year.

• • Serious delinquency rate for Single-Family increased to 2.64%, from 0.63% at the end of the prior year, driven by loans in forbearance due to the COVID-19 pandemic.

• • Multifamily delinquency rate, which does not include loans in forbearance, increased to 0.16% from 0.08% at the end of the prior year.

Managing Risk

• • Completed nearly 426,000 single-family workouts, including forbearance agreements and payment deferrals, versus 47,000 workouts in the prior year.

• • 2.70% and 2.01% of the loans in the Single-Family guarantee portfolio and the Multifamily mortgage portfolio, respectively, were in forbearance as of December 31, 2020.

• • 51% and 88% of the loans in the Single-Family guarantee portfolio and the Multifamily mortgage portfolio, respectively, were covered by credit enhancements as of December 31, 2020.

• (1) See page 12 for additional information about the company's net worth and increases in the aggregate liquidation preference of the senior preferred stock resulting from increases in the company's net worth pursuant to the September 2019 and January 2021 Letter Agreements.

• (2) For additional information on the January 2021 Letter Agreement and ERCF, see the company's Annual Report on Form 10-K for the year ended December 31, 2020.

• (3) See the company's Annual Report on Form 10-K for the year ended December 31, 2020 for additional information on the company's response efforts related to the COVID-19 pandemic and its outlook for 2021.

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McLean, VA - Freddie Mac (OTCQB: FMCC) today reported net income of $7.3 billion for full-year 2020, an increase of 2% compared to net income of $7.2 billion for full-year 2019. The company also reported comprehensive income of $7.5 billion for full-year 2020, a decrease of 3% compared to comprehensive income of $7.8 billion for full-year 2019.

Net revenues were $16.7 billion, an increase of 18% compared to $14.1 billion for the prior year. Net interest income increased 8% to $12.8 billion, primarily driven by growth in the Single-Family guarantee portfolio and higher deferred fee income recognition due to faster loan prepayments as a result of the low mortgage interest rate environment. Investment gains, net increased 122% to $1.8 billion, primarily driven by higher margins on Multifamily loan commitments.

Credit-related expense increased to $2.3 billion from $0.2 billion in the prior year. Benefit (provision) for credit losses shifted to a provision for full-year 2020 due to portfolio growth and higher expected credit losses as a result of the COVID-19 pandemic, partially offset by growth in realized and forecasted house prices during 2020 and a higher benefit for credit enhancement recoveries.

Fourth Quarter 2020 Financial Results

Freddie Mac reported net income of $2.9 billion for the fourth quarter of 2020, an increase of 18% compared to net income of $2.5 billion for the third quarter of 2020. The company also reported comprehensive income of $2.5 billion for the fourth quarter of 2020, an increase of 3% compared to comprehensive income of $2.4 billion for the third quarter of 2020.

Net revenues were $5.0 billion, relatively unchanged from the third quarter of 2020.

Credit-related benefit was $0.1 billion, compared to credit-related expense of $0.6 billion in the prior quarter, driven by realized house price growth in the fourth quarter of 2020, partially offset by a decrease in credit enhancement recoveries.

Summary of Consolidated Statements of Comprehensive Income (Loss)

Full-Year

Three Months Ended

(In millions)	2020	2019	Change	12/31/2020	9/30/2020	Change
Net interest income	$12,771	$11,848	$923	$3,653	$3,457	$196
Guarantee fee income	1,442	1,089	353	281	315	(34)
Investment gains (losses), net	1,813	818	995	856	1,122	(266)
Other income (loss)	633	323	310	232	172	60
Net revenues	16,659	14,078	2,581	5,022	5,066	(44)
Benefit (provision) for credit losses	(1,452)	746	(2,198)	813	(327)	1,140
Credit enhancement expense	(1,058)	(749)	(309)	(327)	(267)	(60)
Benefit for (decrease in) credit
enhancement recoveries	323	41	282	(385)	20	(405)
Real estate owned (REO) operations
expense	(149)	(229)	80	(10)	(40)	30
Credit-related benefit (expense)	(2,336)	(191)	(2,145)	91	(614)	705
Administrative expense	(2,535)	(2,564)	29	(706)	(641)	(65)
Temporary Payroll Tax Cut Continuation
Act of 2011 expense	(1,836)	(1,617)	(219)	(495)	(467)	(28)
Other expense	(723)	(657)	(66)	(243)	(237)	(6)
Operating expense	(5,094)	(4,838)	(256)	(1,444)	(1,345)	(99)
Income (loss) before income tax
(expense) benefit	9,229	9,049	180	3,669	3,107	562
Income tax (expense) benefit	(1,903)	(1,835)	(68)	(756)	(644)	(112)
Net income (loss)	7,326	7,214	112	2,913	2,463	450
Total other comprehensive income (loss),
net of taxes and reclassification
adjustments	205	573	(368)	(391)	(14)	(377)
Comprehensive income (loss)	$7,531	$7,787	$(256)	$2,522	$2,449	$73

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Selected Financial Measures

Net Interest Income and Net Interest Yield

(Dollars in billions)

$11.8

$12.8

0.56%

0.55%

$2.8 0.51%

$2.9 0.50%

$3.5

$3.7

0.58%

0.58%

2019

2020

1Q 2020

2Q 2020

3Q 2020

4Q 2020

Net Interest Income Net Interest Yield

Full-Year 2020

• • Net interest income increased from the prior year, primarily driven by higher guarantee portfolio net interest income, which was largely attributable to portfolio growth, higher contractual guarantee fee rates, and higher deferred fee income recognition due to faster loan prepayments as a result of the low mortgage rate environment.

Fourth Quarter 2020

• • Net interest income increased from the prior quarter, primarily driven by higher guarantee portfolio net interest income, which was largely attributable to portfolio growth and higher contractual guarantee fee rates.

Guarantee Fee Income(1) and Multifamily Guarantee Portfolio

$1,442

$377

$469

$315

$281

$271

$312

2019

2020

1Q 2020

2Q 2020

3Q 2020

4Q 2020

Multifamily Guarantee Portfolio ($B)

Guarantee Fee Income ($M)

(1) Guarantee fee income on a GAAP basis is primarily from the company's multifamily business.

Full-Year 2020

• • Guarantee fee income increased from the prior year, primarily driven by portfolio growth and lower fair value losses on Multifamily guarantee assets due to a decline in interest rates from the prior year.

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Fourth Quarter 2020

• • Guarantee fee income decreased from the prior quarter, primarily due to higher fair value losses on Multifamily guarantee assets as a result of an increase in interest rates from the prior quarter. Because most multifamily loans are not prepayable without penalty, increases in interest rates generally result in lower Multifamily guarantee asset fair values.

Credit-Related Benefit (Expense)

(In billions)

$0.1

$0.7

$0.3

$(0.7)

$(0.3)

$(0.3)

$(1.5)

$(0.2) $(0.2)

$(0.7)

$(1.2)

$(0.3) $(0.6)

$(0.4)

$(0.2) $(0.7)

$(1.1)

$(0.2) $(0.1) $(1.0)

$(0.1) $(2.3)

2019

2020

1Q 2020

2Q 2020

3Q 2020

4Q 2020

Benefit (Provision) for Credit Losses

Credit Enhancement Expense

Benefit for (Decrease in) Credit Enhancement Recoveries

REO Operations Expense

Amounts may not add due to rounding.

Full-Year 2020

• • Credit-related expense increased to $2.3 billion from $0.2 billion in the prior year. Benefit (provision) for credit losses shifted to a provision for full-year 2020 due to portfolio growth and higher expected credit losses as a result of the COVID-19 pandemic, partially offset by growth in realized and forecasted house prices during 2020 and a higher benefit for credit enhancement recoveries.

Fourth Quarter 2020

• • Credit-related benefit was $0.1 billion, compared to credit-related expense of $0.6 billion in the prior quarter, driven by realized house price growth in the fourth quarter of 2020, partially offset by a decrease in credit enhancement recoveries.