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50 FREDDIE MAC RELEASES Q2 FINANCIALS Freddie Mac released its Q2 financial results at the end of July, announcing $2.5 billion in net income and $2.4 billion in comprehensive income for the quarter. e GSE attributed the earnings to "strong business revenues," which it reported at $334 million pretax, and "favorable litigation judgment," referencing a final judgment of $264 million posttax against Nomura Holding America, Inc. e GSE said its income has "remained relatively stable over the last several quarters despite market volatility." Freddie Mac will pay $1.6 billion in dividends to the U.S. Treasury, the amount it earned in excess of its $3.0 billion capital reserve requirement. In the first quarter of the year, Freddie was forced to draw from the Treasury as its capital reserve was below the $3.0 billion mark. Cumulatively, however, Freddie reported paying $40.8 billion more back to the Treasury than it has received since the initial bailout in 2008. e GSE has paid $112.4 billion to the Treasury in dividends compared to the $71.6 billion it received in assistance. "Freddie Mac's transformation continued in the second quarter, with good business results and similarly good financial performance," said Donald H. Layton, CEO at Freddie Mac. "In business operations, our guarantee book grew significantly, credit quality was high, and we are generating a consistent stream of new innovations for our customers." New single-family home loan originations increased 29 percent over the year in Q2, reaching $84 billion. New multifamily loan originations increased 13 percent, totaling $16 billion for the quarter. Delinquencies remained low among both loan categories. Freddie Mac's single-family serious delinquency rate for the second quarter was 0.82 percent, its lowest rate since early 2008. e multifamily delinquency rate was 0.01 percent. Freddie Mac has transferred some of its credit risk on more than $1 trillion in single- family mortgage loans, according to its earnings report, and the GSE plans to continue risk- transfer transactions for loans originated in the second quarter. Freddie has also transferred "a large majority of credit risk" on its multifamily loans. Over the second quarter, Freddie provided $103 billion in liquidity to the mortgage market, funding almost 362,000 single-family homes and 191,000 rental units. About 87 percent of the multifamily rental units Freddie Mac financed were affordable to households earning below the median income in their area. Freddie Mac also reported that first-time homebuyers made up 46 percent of its new purchase loans originated in the second quarter, the highest level in the past 10 years. A SNAPSHOT OF ECONOMIC AND HOUSING TRENDS Two reports remain bullish on the U.S. economy. e U.S. Federal Reserve, which upgraded its economic outlook in a statement at the end of a Federal Open Market Committee (FOMC) meeting, kept the rates unchanged as it monitored the economy for inflation. Likewise, a report to the Secretary of the Treasury from the Treasury Borrowing Advisory Committee of the Securities Industry and Financial Markets Association also highlighted strong economic growth in the second quarter. e report said that economic activity picked up during the quarter with 4.1 percent annualized real GDP growth, rebounding after a slowdown in growth in the first quarter of the year. "Over the past four quarters, real GDP rose 2.8 percent, and growth is expected to remain strong over the remainder of 2018, with a continued fiscal boost after recently enacted tax and spending legislation," the report to U.S. Secretary of the Treasury Steven Mnuchin said. e Fed, in its statement, said the labor market continued to strengthen and economic activity rose at a strong rate. "Job gains have been strong, on average, in recent months, and the unemployment rate has stayed low. Household spending and business fixed investment have grown strongly," the Fed said. According to the Treasury report, the two- year Treasury yield rose slightly as markets came to expect more monetary tightening from the Fed: "In contrast, the 10-year yield declined in May amidst concern about political developments in Italy and has remained in the 2.8-3 percent range in recent weeks, leading to a further flattening of the yield curve." Will these changes in Treasury yields and a flattening yield curve impact housing? While the report remained silent on the impact, it did mention that residential investment decreased during the quarter and together with a "recent decline in new home sales and existing home sales, housing momentum appears to have slowed down recently." However, a strong consumer spending pattern boded well for the economy, the report indicated. "Consumer spending picked up in the second quarter, with real personal consumption expenditures growing at a 4 percent annualized rate," the report found.

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