Operator: Good day, ladies and gentlemen. And welcome to Freddie Mac 2017 Financial Results Media Call [Operator Instructions]. I would now like to introduce your host for today's conference, Mr. Jeffrey Markowitz, Senior Vice President of External Relations and Corporate Communications. You may begin.

Jeffrey Markowitz: Thank you. Good morning, everyone, and thank you for joining us for a discussion of Freddie Mac’s fourth quarter and full year 2017 financial results. We’re joined today by the Company’s CEO, Don Layton; CFO, Jim MacKey; and General Counsel, Bill McDavid. Before we begin, we’d like to point out that during this call, Freddie Mac’s executives may make forward-looking statements, which are based upon a set of assumptions about the Company’s key business drivers and other factors. Changes in these factors could cause the Company’s actual results to vary materially from its expectations. A description of these factors can be found in the Company’s Annual Form 10-K filed today. Freddie Mac’s executives may also discuss the non-GAAP financial measures. For more information about these measures, please see our earnings press release and related materials, which are posted on the Investor Relations section of our Web site at freddiemac.com. Our commentary today will be limited to business and market topics. As you know, we are not able to comment on the development of public policy or legislation concerning Freddie Mac. As a reminder, this is a call for the media, and only they can ask questions. This call is being recorded, and a replay will be made available on Freddie Mac’s Web site shortly. We ask that this call not be rebroadcasted or transcribed. I will now turn the call over to Freddie Mac’s Chief Executive Officer, Don Layton.

Don Layton: Good morning, everyone. Thanks for joining us for our quarterly financial results press call. We value the opportunity to tell you that our performance in 2017 and behind is the transformation of the Company’s direct conservatorship. Of course, we will also take questions at the end. A lot has happened since our last call, so let me get right to our agenda for today's discussion. First, I would cover our financial results both full year and for the quarter. Second, I will get into the individual lines of business. All three businesses had a strong year in terms of performance and execution, each hitting very significant milestones, which I'll review in 2017. In fact, what you will see is that Freddie Mac today is simply a much better company. One that is efficiently and effectively executing on the mission in our charter which is to provide liquidity, stability and affordability to the primary mortgage market. In other words, we’re more effectively executing federal government housing finance policy and in the process building a better housing finance system that is why we exist. Our role is to help home owners and apartment renters not by working alone but by working with other market participants, lenders, servicers, investors and the industry at large to foster safe and strong housing finance system. It’s working. Last year alone together with those partners, we supported 2.3 million families in both the single family and multifamily businesses. Let me now go to financials. I will focus primarily on full year results. 2017 net and comprehensive income was good at $5.6 billion. As you know, comprehensive income is our focus and conservatorship since it is used to calculate our net worth and the resulting dividend obligation under the federal government agreement, which supports us. There were two significant items that impacted our results this year. First, a $5.4 billion write-down of our net deferred tax asset due to the December legislation that cut the corporate tax rate from 35% to 21%. And second, a $2.9 billion after tax benefit from a single large crisis [error] related legal settlement we recognized back in the third quarter. Excluding these two significant items, comprehensive income was $8.1 billion, a clear reflection of strong business fundamentals and our transformations with competitive while run the company. We reached several very significant milestones in our transformation. Our guarantee book of business is growing very nicely. It was up 6% from last year. That's the best annual growth rate in a decade and it surpassed $2 trillion for the first time ever. We have now transferred a portion of the mortgage credit risk on cumulatively more than $1 trillion of single family and multifamily mortgages. And we're efficiently disposing of our legacy assets from the investment portfolio. Symbolic of this is a private label securities portfolio, which keep that $186 billion back in 2005 but ended this past year at just under $5 billion, that's down 97%. Turning now a bit to the fourth quarter. We had a $3.3 billion comprehensive loss, driven by the $5.4 billion write-down of the deferred tax asset. Excluding this significant item, comprehensive income was $2.1 billion, our press release breaks down the detail. With the loss generated by the DTA write down, we ended the year with a net worth deficit of $312 million, which will require a draw from the treasury of that same amount. This draw is expected to take place late in the first quarter. As you may recall, in December, the senior preferred stock purchase agreement or PSPA was amended to increase our capital reserve to $3 billion in January 1st from $600 million which applied in 2017. This replaces the previously scheduled decline to zero, which otherwise have occurred this past January 1st. Our available funding under the PSPA after the upcoming draw will be $140.2 billion, which is equal to about 7% of our guarantees outstanding. Cumulatively, since the PSPA was established over nine years ago now, Freddie Mac has returned more than $112 billion to treasury, nearly 60% more than we have received in draws. In short and seeing through the two significant items I defined, our strong results are delivering a relatively steady level of annual earnings to tax payers, while we hit quite a few key transformation milestones. Now, let me turn to these ultra transformations in each of our lines of business. As I mentioned earlier, we hit many significant milestones this year, first up the single family. The first milestone I'd like to highlight is the growth rate of the single family guarantee book. It's the highest in eight years. Last year alone, it grew 4% from the prior year, reaching $1.8 trillion. This provided $344 billion funding to the market, helping make home possible for 1.5 million families during the year. This is no accident, it's the result of our increased competitiveness and our work to reimage the mortgage experience for the lenders we serve, including better technology to lower their cost and to enable them to provide a better lending experience to their home buying customers. We're also responsibly increasing access to affordable housing, because the funding for first time home buyers is at a 10 year high and we learned late in the year that we officially met all five [FHFA] mandated affordable housing goals for 2016, which are reported on a one year lag. Our high LTV products as we gain more experience are growing in volume and as you would expect, being targeted to first time home buyers and to credit worthy low income borrowers with limited down payment savings. Also, our duty to serve plan in motion, which should help add to these results in 2018 and later, especially in rural and other underserved markets. The core post 2018 book of business that is excluding harp and relief refinance loans grew to 78% of the portfolio, up from 73% at year end 2016. The serious delinquency rate on this core book is 35 basis points, which is up from about 20 basis points the prior several quarters. The hurricanes are responsible for the increase otherwise is still very low given a good underwriting for good economy and rising house prices. Our entire single family book, not just the core book the whole thing, the serious delinquency rate was at 1.08% also at low levels versus the past decade. However, we have seen a recent uptick in delinquencies due to those hurricanes from last fall. That uptick is in line with our expectations and the credit reserves we put into place at that time for the hurricanes. Outside of the areas affected by these hurricanes, the serious delinquency rate decreased to 83 basis points at year-end 2017, down from 97 basis points at year-end 2016 and about the same as the second and third quarter levels. Credit risk transfer, CRT for short, continues to be a game changer in the way we’re funding the residential mortgage market. It's now fully integrated into our business model. In terms of new flow in 2017, 98% of targeted loans were included in the CRT trends actions as referenced last year. For comparison purposes, our conservatorship’s scorecard mandate is 90% not 98%. In terms of our outstanding book of business, more than 35% of the single family guarantee book now has some type of credit risk transfer coverage. This will routinely grow as new loans come on and old pre-CRT [error runs] are paid-off. Last year, we also debut two new CRT offerings and this innovation leadership will help to attract more cost efficient private capital to the market. I note that one of these offerings is for the first time transferring risk on harp collateral. This is an important evolution of the single family credit risk transfer program. Now, let me turn to multifamily. It was another milestone year for our multifamily business. We were the nation's top multifamily financier for the third straight year. Our market leadership drove 29% increase in our guarantee book last year. Purchase volume was at record levels, also increasing 29% in 2017 and funding more than 820,000 multifamily apartment units. Year end outstanding loan commitments were strong at $14.5 billion. A robust market, our innovations and great execution, are driving these excellent results. We have offerings to serve almost every aspect of the multifamily market, including specific segments like smaller rental properties and green financing to highlight two. Importantly, about 83% of our funding was for families earning at or below area median income. This reflects our emphasis on workforce housing, which is critical to our mission. In addition to record purchase volume, we also had a record $8.6 billion in targeted affordable loans, which provide housing to low and very low income households, up more than 50% year-over-year. Delinquency rates on the multifamily book of business, even before the consideration of credit risk transfer, continue to remain near zero, reflecting our strong underwriting skills and the favorable economy. And our multifamily business model, as you no doubt know, is based upon very extensive credit risk transfer. In fact, we transferred to private market investors the large majority of the credit risk based upon our model capital on about 90% of our multifamily transaction flow. We introduced several new credit risk transfer innovations last year to extend our efforts to put private capital to work in front of the tax payers, helping to drive record level securitization volume. And let me finish with a few highlights in the capital markets business. Last year, we approached $100 billion in reduction in less liquid assets, almost all of which are impaired from the mortgage investments portfolio since we began our program in 2013. Less liquid assets are now 28% of the mortgage investments portfolio compared to 45% five years ago. At $253 billion at year end, we are fast approaching the $250 billion retained portfolio mandated target set forth by the PSPA. And we plan to continue to reduce it somewhat further. This is important as the aggregate numbers is the way we reach them in the portfolio. Our disciplined approach to reducing legacy assets from the financial crisis based upon rigorous risk versus reward analysis, generated significant gains. In 2017 alone, we have $600 million gain after tax from the disposition of less liquid assets. This is very pro tax payer. Our investment portfolio, other than legacy asset disposition, has been transformed to a single strategic purpose, supporting the two guaranteed businesses. This includes most notably a robust cash window for a smaller single family lender who are increasingly taking advantage of it. More than one third of our flow in 2017 was near via the cash window. In 2011, it was less than 15%. With that, let me wrap up by noting that we have a company that is focusing on its mission, is focusing on protecting tax payers and is focusing on helping to build a better housing finance system for the nation. We are all proud to be part of this better Freddie Mac and proud to be part of the industry that makes homes possible for so many. I will now open it up to your questions.

Operator: [Operator Instructions] And we have a question from Joe Light with Bloomberg News. Your line is now open.

Joe Light: I was wondering if you could describe what drove the difference between net income and comprehensive income this quarter?

Don Layton: For full year in fact they were the same. Jim, you’ve add to that…

Jim MacKey: I mean, it would be mark to market. So on different positions that flow through the equity not their income.

Don Layton: It was $391 million and we get back to -- its almost always certain valuations of new investment portfolio that are fair value versus not. So I would just tell you we don't focus on it because we try to lift the underlying economics and those using other site to that and in another part of the income statement. So we don’t find -- if we find it one hand clapping and not meaningful.

Operator: Our next question comes from Carisa Chappell with Inside Mortgage.

Carisa Chappell: I wanted to find out in terms of GC, what was the average GC on new business in the fourth quarter. I see that it's given for the full year, but I didn’t find it for the quarter.

Don Layton: As I said, we were going to focus on the question as not -- and single. I think you mean single family GC…

Carisa Chappell: Single family, yes.

Don Layton: The guaranteed GCs, our new acquisitions in the fourth quarter was 36 basis points in the single family business. It’s in the supplements in the press release.

Operator: [Operator Instructions] I’m not showing any more questions. I would like to turn the call back over to Don Layton for closing remarks.

Don Layton: Okay, thank you for joining us this morning. I look forward to sharing our progress and building a better Freddie Mac and a better housing finance system in three months with you. Good morning.

Operator: Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program, you may now disconnect. Everyone have a great day.