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58 | TH E M R EP O RT SECONDARY MARKET THE LATEST O R I G I NAT I O N S E R V I C I N G DATA G O V E R N M E N T S E C O N DA R Y M A R K E T Business Fundamentals of Freddie Mac The GSE posted strong Q3 results based on stable revenue and credit quality. F reddie Mac has come a long way from the time it was taken under con- servatorship in 2008 and reported a strong and stable third quarter during its earnings an- nouncement. The government-sponsored enterprise (GSE) which completed 10 years under conservatorship this year, reported a comprehen- sive income of $2.6 billion driven primarily by "stable business revenues and strong credit qual- ity." This included a $0.2 billion (after-tax) net benefit from single- family legacy asset dispositions and a $0.2 billion (after-tax) benefit from reducing the write-down of the net deferred tax asset from the tax-reform legislation last year. Freddie Mac said that it would also fulfill its $2.6 billion dividend requirement to the U.S. Treasury in December and that it had made cumulative payments totaling $114 billion to the Treasury to date. "The third quarter marked another very good quarter for Freddie Mac, with comprehen- sive income of $2.6 billion. This continues our growing quarterly track record of producing stable and strong earnings, all while responsibly supporting the com- pany's mission and reducing tax- payer exposure to our risks," said Donald Layton, CEO, Freddie Mac. "As we look back on our 10 years in conservatorship, these results make clear that Freddie Mac is a transformed company that plays a key role in reforming and improving America's housing finance system." The GSE also reported strong business fundamentals that helped it to grow during the quarter. Its total guarantee portfolio increased 6 percent to $2.1 trillion, while its single-family total originations decreased 6 percent to $231 billion. Though its refinance volume decreased 30 percent, Freddie Mac reported a 12 percent increase in its purchase volume. Single-family serious delin- quency rates decreased to their lowest levels in a decade during the quarter to 0.73 percent, the GSE said, implying strong credit quality. Its single-family credit guarantee portfolio increased from the prior quarter to $1,875 billion. In the single-family market, Freddie Mac further reduced taxpayer exposure to credit risk by reducing its conservatorship capital framework (CCF) capital needed for credit risk by around 60 percent through credit risk transfer (CRT) transactions during the year. It recently introduced an enhanced CRT structure designed to reduce CCF capital needed for credit risk by approximately 80 percent on related new originations. Freddie Mac said that its total CCF capital declined $7.1 billion, or 12 percent, from the prior-year quarter "reflecting house-price growth plus management actions, such as disposing of legacy assets and transferring credit risk." During the year, Freddie Mac said that it expanded opportunities for U.S. homebuyers and renters by providing around $286 billion in liquidity to the mortgage market, funding more than 992,000 single- family homes and around 551,000 multifamily rental units. Breaking down the demograph- ics for its products, the GSE said that first-time homebuyers represented more than 46 percent of new purchase loans, while 94 percent of the eligible multifam- ily rental units financed were affordable to families earning at or below 120 percent of area median incomes. "As we look back on our 10 years in conservatorship, these results make clear that Freddie Mac is a transformed company that plays a key role in reforming and improving America's housing finance system." —Donald Layton, CEO, Freddie Mac

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