Federal Home Loan Mortgage Q1 2025 Earnings Report

Federal Home Loan Mortgage EPS Results

• Actual EPS: -$0.01
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Federal Home Loan Mortgage Revenue Results

• Actual Revenue: $5.85 billion
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Federal Home Loan Mortgage Announcement Details

• Quarter: Q1 2025
• Date: 5/1/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, May 1, 2025
• Conference Call Time: 9:00AM ET

Federal Home Loan Mortgage (OTCMKTS:FMCC) operates in the secondary mortgage market in the United States. It operates through two segments, Single-Family and Multifamily. The Single-Family segment purchases, securitizes, and guarantees single-family loans; and manages single-family mortgage credit and market risk, as well as manages mortgage-related investments portfolio, single-family securitization activities, and treasury functions. This segment serves mortgage banking companies, commercial banks, regional banks, community banks, credit unions, housing finance agencies, savings institutions, and non-depository financial institutions. The Multifamily segment engages in the purchase, securitization, and guarantee of multifamily loans; issuance of multifamily K certificates; manages multifamily mortgage credit and market risk; and invests in multifamily loans and mortgage-related securities. It serves banks and other financial institutions, insurance companies, money managers, hedge funds, pension funds, state and local governments, and broker dealers. Federal Home Loan Mortgage Corporation incorporated in 1970 and is headquartered in McLean, Virginia.

Federal Home Loan Mortgage Q1 2025 Earnings Call Transcript

Key Takeaways

• Freddie Mac reported Q1 2025 net income of $2.8 billion, a 1% year-over-year increase, and raised its net worth to $62.4 billion.
• The single-family segment generated $2.3 billion in net income (up 16%), with strong credit metrics and first-time homebuyers representing 52% of its $78 billion in new business.
• The multifamily segment earned $533 million (down 35%), driven by 29% higher net interest income, a 5% larger portfolio, and $16 billion in securitizations—56% of which were fully guaranteed.
• Freddie Mac now forecasts U.S. house prices to rise 4.2% over the next 12 months and 2.8% over the subsequent year, up from prior expectations.
• Working with FHFA Director Bill Pulte, the company is streamlining operations and cutting non-mission activities to reduce G&A expenses, increase liquidity and invest in technology to lower mortgage costs.

Presentation

[Jeff Markowitz, SVP & Chief External Affairs Officer at Freddie Mac]

Good morning, and thank you for joining us for a presentation of Freddie Mac's First Quarter twenty twenty five Financial Results. I'm Jeff Markowitz, Senior Vice President and Chief External Affairs Officer. We're joined today by Executive Vice President and Chief Financial Officer, Jim Whitlinger. Before we begin today, we'd like to point out that during the call, Mr. Whitlinger may make forward looking statements based on assumptions about the company's key business drivers and other factors.

[Jeff Markowitz, SVP & Chief External Affairs Officer at Freddie Mac]

Changes in these factors could cause the company's actual results to materially vary from its expectations. A description of these factors can be found in the company's quarterly report on Form 10 Q filed today. You will find the 10 Q earnings press release and related materials posted on the Investor Relations of freddiemac.com. This call is recorded and a replay will soon be available on freddiemac.com. We ask that the call not be rebroadcast or transcribed.

[Jeff Markowitz, SVP & Chief External Affairs Officer at Freddie Mac]

With that, I'll turn the call over to our CFO, Jim Whitlinger.

[Jim Whitlinger, EVP & CFO at Freddie Mac]

Good morning, and thank you for joining our call to review Freddie Mac's first quarter performance. Let's start with the bottom line. Freddie Mac delivered a solid performance, earning 2,800,000,000 of net income in the first quarter, driving the company's net worth to $62,000,000,000 We helped 313,000 families across the nation buy, rent or refinance a home in the quarter, with 52% of our single family loan purchases supporting first time homebuyers and 92% of the eligible rental units financed affordable to middle income renters who form the backbone of our communities. Our commitment to our mission is unwavering and will only improve as we work with Director of US Federal Housing, Bill Pulte, to streamline our operations by stripping away unnecessary bureaucracy and eliminating nonessential activities. I'll talk a little more about that and what it means for Freddie Mac before I conclude today's call.

[Jim Whitlinger, EVP & CFO at Freddie Mac]

So let's get right to the financials. As I noted this morning, we reported first quarter twenty twenty five net income of $2,800,000,000 an increase of $28,000,000 or 1% year over year. This increase was primarily driven by higher net interest income from continued mortgage portfolio growth and lower funding costs, partially offset by lower yields on short term investments. Our first quarter net interest income was $5,100,000,000 up $343,000,000 or 7% year over year. The increase was primarily driven by continued mortgage portfolio growth in single family and an increase in the volume of fully guaranteed securitizations in multifamily.

[Jim Whitlinger, EVP & CFO at Freddie Mac]

Noninterest income for the first quarter was $750,000,000 a decline of $248,000,000 or 25% lower from the prior year quarter. This was primarily due to a decrease in net investment gains in multifamily. Noninterest expense declined $34,000,000 or 2% year over year, primarily due to lower credit enhancement expenses driven by lower volume of cumulative credit risk transfer transactions. Our provision for credit losses was $280,000,000 for this quarter, primarily driven by a credit reserve build in single family attributable to new acquisitions. Turning to our individual business segments, the single family segment reported net income of $2,300,000,000 for the quarter, up $316,000,000 or 16% year over year.

[Jim Whitlinger, EVP & CFO at Freddie Mac]

Single family net revenues of $4,900,000,000 increased 10% from the prior year quarter. This increase was primarily driven by a 6% increase in our net interest income, which benefited from continued mortgage portfolio growth. Our single family mortgage portfolio at the end of the quarter was $3,100,000,000,000 up 2% year over year. Our provision for single family credit losses was an expense of $228,000,000 this quarter, primarily due to credit reserve build for new acquisitions. The provision in the prior year quarter was $120,000,000 which was primarily attributable to new acquisitions and increasing mortgage interest rates.

[Jim Whitlinger, EVP & CFO at Freddie Mac]

Our current house price forecast assumes an increase of 4.2% over the next twelve months and 2.8% over the subsequent twelve months. This is a change from our prior forecast at the end of last quarter, which assumed 2.73.3% growth over the next twelve and subsequent twelve months, respectively. The single family allowance for credit losses coverage ratio at the end of this quarter was 21 basis points, unchanged from last quarter and up one basis point year over year. New business activity totaled $78,000,000,000 this quarter, up from $62,000,000,000 in the first quarter of twenty twenty four. Both home purchase and refinance activity increased due to higher market coverage and conforming loan limits as well as house price appreciation in recent quarters.

[Jim Whitlinger, EVP & CFO at Freddie Mac]

Refinance activity accounted for 21% of our total new business activity this quarter, up from 15% in the same quarter last year as we saw mortgage rates come down throughout the quarter. The thirty year mortgage rate at the end of the quarter was 6.65%, down from 6.85% at the end of the fourth quarter of twenty twenty four and from 6.79% at the end of the first quarter of twenty twenty four. First time homebuyers represented 52% of our total new business activity or 81,000 households in the first quarter. The average estimated guarantee fee charged on new business was 54 basis points, while the weighted average original loan to value on new purchases was 77% and the weighted average original credit score was 750 Credit characteristics of our single family mortgage portfolio remained strong as well, with the weighted average current loan to value ratio at 52% and the weighted average current credit score at 754. At the end of the quarter, 62% of our single family mortgage portfolio had some form of credit enhancement.

[Jim Whitlinger, EVP & CFO at Freddie Mac]

The single family serious delinquency rate remained low at 59 basis points, unchanged from the prior quarter and up seven basis points from the prior year quarter. The year over year increase was primarily due to a higher serious delinquency rate for loans originated drawing and after 2022 as well as lingering impacts from hurricanes that occurred late in 2024. On a related note, in the first quarter, we helped approximately 25,000 families remain in their homes through loan workouts. Moving on to multifamily, the segment reported net income of $533,000,000 which is down $288,000,000 or 35% from the prior year quarter. This decrease was primarily driven by lower non interest income of $585,000,000 which decreased $427,000,000 from the prior year quarter.

[Jim Whitlinger, EVP & CFO at Freddie Mac]

It also was driven by lower revenues from held for sale loan purchases and securitization activities, impacts from interest rate management activities and less favorable fair value changes from prepayment rates. Net interest income of $349,000,000 was up 29% year over year, primarily driven by an increase in the volume of fully guaranteed securitizations. The multifamily provision for credit losses was an expense of $52,000,000 this quarter versus $61,000,000 in the prior year quarter. Our multifamily new business activity was $10,000,000,000 for the first quarter, up $1,000,000,000 from a year ago. Our multifamily business provided financing for 89,000 multifamily rental units in the quarter with 66% of eligible rental units affordable to low income families.

[Jim Whitlinger, EVP & CFO at Freddie Mac]

Also in the first quarter, we securitized $16,000,000,000 of multifamily loans, dollars 5,000,000,000 more than in the prior year quarter. Fully guaranteed securitizations represented 56% of total securitizations, up from 36% in the first quarter twenty twenty four. The average guarantee fee on our total guarantee portfolio increased five basis points year over year to 52 basis points. Our multifamily mortgage portfolio increased five percent year over year to $467,000,000,000 The multifamily delinquency rate at the end of the quarter was 46 basis points. This was up 12 basis points from 34 basis points at the March 2024 and up six basis points from the fourth quarter of twenty twenty four.

[Jim Whitlinger, EVP & CFO at Freddie Mac]

The year over year increase in the delinquency rate was primarily driven by increased delinquencies in our floating rate loans, including small balance loans that are in their floating rate period. 98% of these delinquent loans had credit enhancement coverage at the end of the quarter. At the multifamily mortgage portfolio level, our credit enhancement coverage was 93%. On the capital front, our net worth increased to $62,400,000,000 at the end of the quarter, representing a 24% increase year over year. Let me conclude by noting that many of you are closely following the announcements and orders issued by Director Pulte and what those mean for Freddie Mac.

[Jim Whitlinger, EVP & CFO at Freddie Mac]

Briefly, Director Pulte has helped us streamline our business and harness the productivity of thousands of Freddie Mac employees now in the office full time. He has eliminated activities not central to Freddie Mac's mission as well as requirements that make it more expensive to finance a loan, but which might provide little tangible benefit to the majority of American renters and homebuyers. We support actions he has taken to drive fraud and waste out of The U. S. Housing finance system.

[Jim Whitlinger, EVP & CFO at Freddie Mac]

We expect the savings associated with FHFA's new direction to reduce Freddie Mac's general and administrative expenses in 2025 and beyond. Furthermore, we believe that regulatory changes making it easier for us to responsibly acquire loans will increase our revenue and enable us to provide even greater liquidity to the single family and multifamily market. That should enable Freddie Mac to invest more in critical technology, increase our net worth and lower the cost of originating a mortgage. Taking a step back, the director has challenged us to create a more affordable US housing system. We are committed to rising to that challenge.

[Jim Whitlinger, EVP & CFO at Freddie Mac]

Thank you for joining us today.

Participants

Analysts

• Jeff Markowitz, SVP & Chief External Affairs Officer at Freddie Mac
• Jim Whitlinger, EVP & CFO at Freddie Mac