The government-sponsored enterprise (GSE) had $414 billion in single-family loan purchases this quarter, an all-time high and a staggering 37% year-over-year increase. Originations were similarly high, with $374 billion in purchase mortgages and refinances representing a 43% year-over-year increase. The activity was primarily driven by mortgage refinancings, which accounted for 74% of single-family originations and saw an incredible 64% year-over-year increase.
Freddie Mac's guarantee portfolio grew by 8%, with single-family loans growing by 10%. While this growth was impressive, it was also well within the allowable 5% per year per the company's agreement with FHFA. On the other hand, multifamily loan originations were much lower than expected at only $2.4 billion. This is a stark contrast to the $17 billion in originations last quarter and more than 50% decrease in multifamily loan production year-over-year.
The GSE's credit losses also decreased this quarter due to a low rate environment. Delinquencies stayed below 1% for the third consecutive quarter, and decreases were seen in 90+ day delinquencies for both single- and multifamily loans. Non-credit impairment losses were also down substantially, accounting for just 7 basis points of total losses as opposed to 17 basis points in the second quarter.
Overall, Freddie Mac's 2020 third quarter was incredibly strong, with unprecedented single-family loan production and a decrease in credit losses due to a low interest rate environment. Multifamily loan originations were somewhat disappointing, but this was offset by robust single-family activity. Going forward, the GSE will continue to monitor its credit losses and loan origination trajectories to ensure it is meeting its objectives and maintaining a sound financial position.
In the third quarter of 2020, Freddie Mac had its strongest single-family loan production to date. With historically low interest rates, borrowers took advantage of these conditions to refinance their mortgages - accounting for 74% of single-family originations. This surge in single-family loan purchases totaled $414 billion for the quarter, a 37% year-over-year increase. Total originations were also strong, with $374 billion in purchase mortgages and refinances, a 43% year-over-year increase. As a result, Freddie Mac's guarantee portfolio grew by 8%.
However, while single-family loan originations were extremely promising, multifamily loan production was much lower than expected at only $2.4 billion in Q3 - reflecting a 50% decrease year-over-year. Credit losses also decreased this quarter, with delinquencies staying below 1% for the third consecutive quarter and decreases seen in 90+ day delinquencies for both single- and multifamily loans. Non-credit impairment losses were also down substantially, accounting for just 7 basis points of total losses as opposed to 17 basis points in the second quarter.
Overall, Freddie Mac's Q3 2020 results demonstrate an impressive performance. The record single-family loan production speaks to how good a decision it was for the organization to stay within its agreement with the Federal Housing Finance Agency and limit growth to 5%. Despite the poor multifamily loan performance, single-family activity was enough to make up for any potential losses. Going forward, the GSE will need to continue to monitor its credit losses and loan origination trajectories to ensure it is meeting its objectives and maintaining a sound financial position.
This article was contributed on Aug 10, 2023
