10-K: Freddie Mac Reports $11.9 Billion Net Income for 2024, a 13% Increase Year-Over-Year

Freddie Mac's 2024 Form 10-K reveals a strong financial performance with a 13% increase in net income, driven by higher net revenues and a growing mortgage portfolio.

Summary

• Freddie Mac's 2024 Form 10-K reports a net income of $11.9 billion, a 13% increase compared to 2023.
• Net revenues increased by 13% to $23.9 billion, driven by higher net interest income and non-interest income.
• The company provided $411 billion in liquidity to the mortgage market in 2024, enabling the financing of 1.6 million home purchases, refinancings, and rental units.
• The mortgage portfolio increased by 3% year-over-year to $3.6 trillion.
• Single-Family mortgage portfolio was $3.1 trillion, up 2% year-over-year, while the Multifamily mortgage portfolio was $467 billion, up 6% year-over-year.
• Credit enhancement coverage stood at 62% for the Single-Family and 91% for the Multifamily mortgage portfolios.
• The company continues to operate under conservatorship, with FHFA as the Conservator.
• Freddie Mac is required to comply with the ERCF as it is amended from time to time pursuant to the January 2025 Letter Agreement, although compliance with certain provisions is suspended during conservatorship.
• The maximum conforming loan limit for a one-family residence has been set at $806,500 for 2025, an increase from $766,550 for 2024.

Sentiment

Score: 7

Explanation: The document presents a generally positive outlook with strong financial results, but the ongoing conservatorship and related restrictions temper the overall sentiment.

Positives

• Net income increased by 13% to $11.9 billion in 2024.
• Net revenues increased by 13% to $23.9 billion.
• The company provided $411 billion in liquidity to the mortgage market.
• The mortgage portfolio increased by 3% to $3.6 trillion.
• The maximum conforming loan limit for a one-family residence has been set at $806,500 for 2025.
• The average estimated guarantee fee rate on our Single-Family mortgage portfolio increased slightly year-over-year.

Negatives

• The company continues to operate under conservatorship, which imposes restrictions on its business activities.
• The company's capital levels are significantly below the levels that would be required under the ERCF.
• The company has a material weakness in its internal control over financial reporting related to disclosure controls and procedures.

Risks

• The company's future is uncertain due to the ongoing conservatorship.
• FHFA, as Conservator, controls the company's business activities and may require actions that reduce profitability or increase risk.
• The Purchase Agreement and the terms of the senior preferred stock significantly limit the company's business activities.
• The company is exposed to mortgage credit risk, which could lead to financial losses.
• The company faces risks related to its delegated underwriting process and potential for mortgage fraud.
• Changes in interest rates and market spreads could negatively affect the company's financial results.
• A failure in the company's operational systems or those of third parties could disrupt business operations.
• Cybersecurity threats pose a significant risk to the company's systems and data.
• The company relies on third parties for certain functions, and their failures could disrupt business operations.
• The company faces risks associated with the models it uses for business and risk management decisions.
• The company may not achieve its housing goals, Duty to Serve, and equitable housing finance requirements.
• The company is exposed to increased credit losses and credit-related expenses in the event of a natural disaster or catastrophic event.

Future Outlook

The company's future is uncertain, and the conservatorship has no specified termination date. The company does not know what changes may occur to its business model during or following conservatorship, including whether it will continue to exist.

Management Comments

• Freddie Mac is required to comply with the ERCF as it is amended from time to time pursuant to the January 2025 Letter Agreement, although compliance with certain provisions is suspended during conservatorship.
• We have four strategic priorities, each of which was created to ensure we fully serve our mission: Deliver on affordable housing; Identify, assess, and manage our risks; Grow, develop, and empower talent for today and tomorrow; and Build financial strength to serve our mission.

Industry Context

The announcement provides insights into the performance of a major GSE and its role in the U.S. housing market, reflecting broader trends in mortgage lending, securitization, and risk management within the financial services industry.

Comparison to Industry Standards

• The document does not provide a direct comparison to industry standards.
• However, it mentions Fannie Mae as a primary competitor and notes efforts to align certain practices to achieve and maintain market acceptance of the UMBS.
• The report also references Ginnie Mae and FHA/VA as competitors in the single-family mortgage market.
• The document does not provide specific details on how Freddie Mac's results compare to those of its competitors.

Management Changes

Legal Proceedings

• The company is involved in a variety of legal proceedings arising in the ordinary course of business and in connection with the conservatorship and Purchase Agreement.
• A jury returned a verdict against FHFA, Fannie Mae, and Freddie Mac awarding compensatory damages of $282 million to Freddie Mac junior preferred shareholders and $31 million to Freddie Mac common shareholders in a lawsuit concerning the Purchase Agreement.

Related Party Transactions

• The company has transactions with Treasury related to the Purchase Agreement, senior preferred stock, and warrant.
• The company has transactions with Fannie Mae related to the UMBS and CSS.
• The company has transactions with CSS related to the operation of the Common Securitization Platform.

Stakeholder Impact

• The company's performance impacts shareholders, employees, customers, suppliers, and creditors.
• The company's activities support the U.S. housing market and the overall economy.
• The company's affordable housing programs benefit lowand moderate-income families.

Next Steps

• The company will continue to operate under the direction of FHFA as Conservator.
• The company will continue to implement its strategic priorities and manage its business in a safe and sound manner.
• The company will continue to monitor and manage its risks, including credit, market, and operational risks.
• The company will continue to work towards meeting its affordable housing goals and Duty to Serve requirements.

Key Dates

Keywords

Freddie Mac, mortgage, conservatorship, financial results, housing market, credit risk, liquidity, ERCF, FHFA, securitization