Freddie Nets $2.9B in 4Q; Lenders Face GSE Cash Window Limit - IMFnews

Share Register Advertise February 11, 2021 Freddie Mac Nets $7.3 Billion in 2020, Strong 4Q dhollier@imfpubs.com Freddie Mac reported net income of $2.9 billion in the fourth quarter of 2020. That brought annual profits to $7.3 billion, with the company’s net worth rising to $16.4 billion by the end of the year. Quarterly profits were up $450 million sequentially, driven primarily by a release from loss reserves, which Freddie attributed to home price growth in the fourth quarter. Net revenues for the full year rose 18%, hitting $16.7 billion. That increase was largely due to an 8% bump in net interest income with growth in the company’s single-family guarantee portfolio. Freddie said that faster prepayment speeds also contributed to the increase, as borrowers took advantage of low interest rates to refinance their loans. The enterprise’s robust financial performance in 2020 was offset, of course, by the cost of dealing with the pandemic. Freddie reported that credit-related expenses for the year increased by an order of magnitude, rising from $191 million in 2019 to $2.3 billion by the end of 2020. Here too, the increase in home prices came as a boon to Freddie’s bottom line, shifting a $327 million provision for losses in the third quarter to an $813 million benefit in the fourth. Limits on GSE Cash Window Sales Could Impact Upwards of 100 Sellers jbancroft@imfpubs.com An agreement by the Treasury Department and Federal Housing Finance Agency in the waning days of the Trump administration could have a wide-ranging impact on deliveries to the government-sponsored enterprises. The provision states that GSE cash purchases – which are currently the most popular delivery method used by loan sellers – can’t exceed more than $1.5 billion per individual seller over any four-quarter period. The cap is scheduled to take effect January 2022. Based on calculations by Inside Mortgage Finance of sales to the GSEs in 2020, 62 sellers to Freddie Mac topped the $1.5 billion marker for cash sales. Fannie Mae’s disclosures on the issue are more opaque, though some 105 sellers to Fannie Mae likely went over the limit. Granted, 2020 volume was inflated due to the boom in refinance activity. For more details on the sellers, see the new issue of Inside Mortgage Finance, which will be published later today. loanDepot Goes Public with Scaled Down IPO bivey@imfpubs.com loanDepot priced its initial public offering Thursday, slashing both the initial share price and the number of shares offered. In January, loanDepot detailed plans to sell as many as 17.3 million shares for up to $21 apiece. The IPO would have generated proceeds of $362.3 million. However, the IPO completed Thursday sold 3.9 million shares at $14 each, raising $53.9 million. This isn’t the first time loanDepot’s IPO plans have gone awry. The nonbank filed plans to complete an IPO in 2015, though the papers were eventually withdrawn and loanDepot opted for $150 million in term debt financing in 2016. Redwood’s Net Income Drops in Fourth Quarter bivey@imfpubs.com Redwood Trust produced $54.30 million of net income in the fourth quarter of 2020, a 61.7% decline compared with the previous quarter. The steep reduction was largely tied to lower income from investments. Redwood generates income from three main initiatives: aggregation of residential mortgages, business-purpose lending activities and investments. The lending units are ramping up business after volatility in March 2020 while income from investments soared in the third quarter of the year then returned to earth in the fourth quarter. Overall, Redwood lost $581.85 million in 2020. The real estate investment trust also recently launched RWT Horizons, a venture investing effort focused on early-stage technology companies that have plans to “disrupt” the mortgage finance sector. Still, officials at Redwood said the primary focus for the REIT this year will be aggregation of residential mortgages and business-purpose loans. “The operating capital we allocate to these businesses is expected to generate returns on equity north of 20%, post tax levels, which are very difficult to come by when sourcing third-party investments in today’s compressed yield environment,” Chris Abate, Redwood’s CEO, said Wednesday during an earnings call. “Most importantly, these businesses serve large and growing markets not covered by government lending programs, and as such are positioned to generate scalable and repeatable sources of future earnings, even in a less accommodative interest rate environment.” Short Takes: GSE Origination Flexibilities Extended / Few Foreclosures / Non-QM MBS from Caliber / Equitable Housing Hires at Freddie bivey@imfpubs.com The Federal Housing Finance Agency extended a number of flexibilities related to originations of mortgages for the government-sponsored enterprises by one month to the end of March. The flexibilities linked to the coronavirus include alternative appraisals, alternatives for documenting income/employment and expanded use of power of attorney to assist with loan closings... Foreclosure activity fell to another all-time low in January, with 9,702 filings, according to Attom Data Solutions. Of course, the limited activity is due to moratoriums on foreclosures of federally backed mortgages... An affiliate of Caliber Home Loans is preparing to issue a $152.04 million mortgage-backed security stocked with non-qualified mortgages. Loans in the deal have seasoned for an average of 26 months, according to a presale report by Fitch Ratings. All of the loans were in an MBS previously issued by Caliber’s affiliate... Freddie Mac created two new senior leadership roles dedicated to equitable housing in single-family and multifamily activities. “With this new position we are bringing a dedicated and distinct focus to address some of the most systemic issues we face in homeownership and wealth in communities of color,” said Donna Corley, an executive vice president and head of single-family business at Freddie. Correspondents Gain a Bit on Retail in 4Q Correspondents increased their market share by 189 basis points to 27.1% in the fourth quarter of 2020. The gain came at the expense of the retail channel, whose market share dropped to 57.6%, while brokers maintained their slice of the pie at 15.3%. Inside Mortgage Finance’s Agency Channel Analysis data report delves into the channel usage of more than 1,600 lenders, reporting on the volume of originations they sourced from each channel for delivery to Fannie Mae, Freddie Mac and Ginnie Mae. See what channel combinations are being used to fill the pipeline and use the data to plot out your own best channel choices. To ensure delivery to your inbox, add news@imfpubs.com to your address book or safe sender list. Home | Update Your Account | Mortgage Data | User Agreement | Unsubscribe © Copyright 2020 Inside Mortgage Finance Publications 7910 Woodmont Ave., Suite 1000, Bethesda, MD 20814 Tel: (301) 951-1240; Fax: (301) 656-1709

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