Freddie Mac Q2 2025 Earnings Report

Freddie Mac EPS Results

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

Freddie Mac Revenue Results

• Actual Revenue: $5.92 billion
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Freddie Mac Announcement Details

• Quarter: Q2 2025
• Date: 7/31/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, July 31, 2025
• Conference Call Time: 9:00AM ET

Federal Home Loan Mortgage Corporation 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.

Freddie Mac Q2 2025 Earnings Call Transcript

Key Takeaways

• Negative Sentiment: Q2 net income was $2.4 B, down 14% year-over-year due to higher provisions for credit losses.
• Positive Sentiment: Net interest income increased 8% year-over-year to $5.3 B, driven by portfolio growth and lower funding costs.
• Negative Sentiment: Provision for credit losses nearly doubled to $783 M, reflecting modeled house price declines and lower forecasts.
• Positive Sentiment: Total mortgage portfolio grew 2% year-over-year to $3.6 T, and net worth rose 22% to $65 B, bolstering capital strength.
• Neutral Sentiment: Freddie Mac provided over $100 B in liquidity, financing 360 K families in Q2, including more than 100 K first-time homebuyers.

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 Second 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, we'd like to point out that during the call, Mr. Wittlinger 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 those factors can be found in the company's quarterly report on Form 10 Q filed today. You'll find the 10 Q, earnings press release and related materials posted on the Investor Relations section 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 Freddie Mac's CFO, Jim Whitlinger.

[Jim Whitlinger, EVP & CFO at Freddie Mac]

Good morning, and thank you for joining our call to review Freddie Mac's second quarter performance. We'll begin with the bottom line. Second quarter net income of $2,400,000,000 drove our company's net worth to $65,000,000,000 at quarter end. The total mortgage portfolio at end of second quarter stands at $3,600,000,000,000 and we provided more than $100,000,000,000 of liquidity to The U. S.

[Jim Whitlinger, EVP & CFO at Freddie Mac]

Housing finance system. Those dollars helped make home possible for more than 360,000 American families in the second quarter alone. Many of those families qualified for a mortgage for the first time. In fact, of the 206,000 homebuyers we helped in the quarter, more than 100,000 purchased their very first home. And most of the houses and apartments we helped finance were within reach for middle class families.

[Jim Whitlinger, EVP & CFO at Freddie Mac]

53% of the single family homes and 95% of eligible rental units we financed were affordable to low and moderate income households. Now let's look at the details of our quarterly financial performance. As I mentioned earlier, we earned net income of $2,400,000,000 this quarter, a decrease of $378,000,000 or 14% year over year. This decrease was primarily driven by higher provision for credit losses in both of our business segments. The higher provision taken this quarter was due to modeled and observed house price declines and lower forecasted house price appreciation.

[Jim Whitlinger, EVP & CFO at Freddie Mac]

Second quarter net interest income was $5,300,000,000 up $371,000,000 or 8% year over year. This increase was driven by continued growth in the mortgage portfolio, which grew 2% year over year and lower funding costs, partially offset by lower yields on short term investments. Our noninterest income of $617,000,000 for the second quarter declined $443,000,000 or 42% from the prior year quarter. This was primarily due to lower investment gains in our multifamily business. As noted, our provision for credit losses increased this quarter to $783,000,000 The provision for credit losses was $394,000,000 in the prior year quarter, mainly attributable to new acquisitions in the single family business.

[Jim Whitlinger, EVP & CFO at Freddie Mac]

Our total mortgage portfolio at the end of the quarter was $3,600,000,000,000 a 2% increase year over year. Turning to our individual business segments, the single family business reported net income of $2,100,000,000 for the quarter, down $192,000,000 or 8% year over year. Single family net revenues of $5,100,000,000 increased slightly by $41,000,000 or 1% from the prior year quarter. This increase was primarily driven by a $263,000,000 or 6% increase in net interest income. Net interest income benefited from continued growth in our single family mortgage portfolio and lower funding costs, partially offset by lower yields on short term investments.

[Jim Whitlinger, EVP & CFO at Freddie Mac]

Noninterest income of $237,000,000 declined by $222,000,000 or 48% from the prior year quarter. This decline was primarily driven by impacts from interest rate risk management activities. Our provision for single family credit losses was an expense of $622,000,000 this quarter, primarily due to a credit reserve build driven by modeled and observed house price declines, lower forecasted house price appreciation and provision on new originations under CECL recognition as we continue to grow our single family portfolio. The provision in the prior year quarter was an expense of $315,000,000 which was primarily attributable to new acquisitions in the quarter. Our modeled observed house prices declined 0.6% this quarter.

[Jim Whitlinger, EVP & CFO at Freddie Mac]

Our current house price forecast assumes an increase of 1.3% over the next twelve months and 0.4% over the subsequent twelve months. This is a change from our forecast at the end of last quarter, which assumed 4.2% growth over the next twelve months and 2.8% growth over the subsequent twelve months. The single family allowance for credit losses at the end of the quarter was $7,500,000,000 This translated to an allowance for credit losses coverage ratio of 23 basis points, up from 21 basis points at the end of the year 2024 and as of the prior quarter. The single family serious delinquency rate declined four basis points quarter over quarter from 59 to 55 basis points. Year over year, the delinquency rate increased five basis points from 50 to 55 basis points.

[Jim Whitlinger, EVP & CFO at Freddie Mac]

This was primarily driven by a higher serious delinquency rate for loans originated during 2022 and later, as well as lingering impacts from hurricanes that occurred in late twenty twenty four. In the second quarter, we helped approximately 24,000 families remain in their homes through loan workouts. Our single family mortgage portfolio at the end of the quarter was $3,100,000,000,000 up two percent year over year. Credit characteristics of our single family portfolio continue to remain strong, with the weighted average current loan to value ratio at 53% and the weighted average current credit score at 754. At the end of the quarter, 62% of our single family portfolio had some form of credit enhancement.

[Jim Whitlinger, EVP & CFO at Freddie Mac]

New business activity totaled $94,000,000,000 this quarter, up $16,000,000,000 from the first quarter of this year. First time homebuyers represented 53% of our new single family home purchase loans. Higher mortgage rates continue to impact both purchase and refinance activity. Refinance activity accounted for a little over 19% of our total new business activity this quarter. For new acquisitions, our weighted average original loan to value was 77% and weighted average credit score was 759.

[Jim Whitlinger, EVP & CFO at Freddie Mac]

The average estimated guarantee fee charged on new business was 54 basis points. The thirty year mortgage rate peaked at 6.89% during the quarter and ended the quarter at 6.77%. That was up from 6.65% at the end of the first quarter and slightly down from 6.86% at the end of the prior year quarter. Moving on to Multifamily, the segment reported net income of $295,000,000 That was down $186,000,000 or 39% from the prior year quarter. This decrease was primarily driven by lower non interest income, which declined 37% or $221,000,000 year over year.

[Jim Whitlinger, EVP & CFO at Freddie Mac]

The decrease in non interest income was primarily driven by lower revenues from held for sale loan purchase and securitization activities as well as impacts from interest rate risk management activities. The decline in noninterest income was partially offset by net interest income of $4.00 $1,000,000 which was up $108,000,000 or 37% year over year. The increase in net interest income was primarily driven by a change in the company's multifamily business strategy that resulted in an increase in the volume of fully guaranteed securitizations. The multifamily provision for credit losses was an expense of $161,000,000 this quarter versus $79,000,000 in the prior year quarter. The provision for credit losses this quarter was primarily driven by a credit reserve build attributable to new loan purchase commitment and acquisition activity, coupled with deterioration in the credit performance of certain delinquent loans.

[Jim Whitlinger, EVP & CFO at Freddie Mac]

Our multifamily new business activity was $12,000,000,000 for the second quarter, up 2,000,000,000 from the last quarter. The business provided financing for 99,000 multifamily rental units this quarter with 74% of eligible units affordable to low income families. The multifamily mortgage portfolio increased 4% year over year to $466,000,000,000 92% of the multifamily mortgage portfolio was covered by credit enhancements at the end of the quarter. The multifamily delinquency rate at the end of the quarter was 47 basis points, up nine basis points from the June 2024. This increase was primarily driven by delinquency in our floating rate loans and small balance loans.

[Jim Whitlinger, EVP & CFO at Freddie Mac]

97% of these delinquent loans had credit enhancement coverage. On the capital front, our net worth increased to $65,000,000,000 at the end of the quarter, representing a 22% increase year over year. I'll conclude by noting that our efforts to reduce costs for Freddie Mac, lenders, borrowers and renters is ongoing. As I discussed last quarter, the actions of the Director of U. S.

[Jim Whitlinger, EVP & CFO at Freddie Mac]

Federal Housing, Bill Pulte, are enabling further transformation of the business, making us more efficient and effective. We're working closely with U. S. Federal Housing to lower expenses, increase revenue and improve productivity wherever we can. For example, we are working together to increase competition among the credit scoring agencies.

[Jim Whitlinger, EVP & CFO at Freddie Mac]

These actions ultimately will result in an even safer and stronger Freddie Mac and a better US housing finance system. That is our mission. Thank you for joining us today.

Participants

Executives

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