8-K: Freddie Mac Reports Q2 2025 Net Income Decline Amid Rising Credit Loss Provisions

Freddie Mac announced a 14% year-over-year decrease in second-quarter 2025 net income to $2.4 billion, primarily driven by an increase in the provision for credit losses.

Summary

• Net income for the second quarter of 2025 was $2.4 billion, a 14% decrease from $2.765 billion in the second quarter of 2024.
• Net revenues for the second quarter of 2025 were $5.9 billion, a 1% decrease from $5.988 billion in the second quarter of 2024.
• The provision for credit losses increased to $0.8 billion in Q2 2025 from $0.394 billion in Q2 2024, primarily due to a credit reserve build in Single-Family.
• The total mortgage portfolio grew 2% year-over-year to $3.6 trillion as of June 30, 2025.
• Freddie Mac's net worth increased to $64.8 billion as of June 30, 2025.
• The company financed 264,000 mortgages and 99,000 rental units in Q2 2025.
• 53% of eligible single-family loans and 95% of eligible multifamily rental units were affordable to lowto moderate-income families.
• The Single-Family serious delinquency rate increased to 0.55% at June 30, 2025, from 0.50% at June 30, 2024.
• The Multifamily delinquency rate increased to 0.47% at June 30, 2025, from 0.38% at June 30, 2024.
• Freddie Mac was not required to pay a dividend to Treasury in June 2025, as it has not yet built sufficient capital to meet regulatory requirements.
• The senior preferred stock liquidation preference increased to $135.1 billion on June 30, 2025, and is projected to increase to $137.5 billion on September 30, 2025.

Sentiment

Score: 4

Explanation: The financial results show a decline in net income and an increase in credit loss provisions and delinquency rates, indicating some deterioration in performance and a more cautious outlook. While portfolio growth and affordable housing support are positive, the core profitability metrics are weaker year-over-year.

Positives

• Total mortgage portfolio increased 2% year-over-year to $3.6 trillion, indicating business growth.
• Net interest income increased by 8% year-over-year to $5.3 billion, driven by mortgage portfolio growth and lower funding costs.
• New business activity in Single-Family increased to $94 billion from $85 billion in Q2 2024, primarily due to increased refinance activity.
• Freddie Mac supported 363,000 households, financing 264,000 mortgages and 99,000 rental units.
• A significant portion of financed housing was affordable: 53% of eligible single-family loans and 95% of eligible multifamily rental units were affordable to lowto moderate-income families.
• The company's net worth increased to $64.8 billion, enhancing its safety and capital position under conservatorship.

Negatives

• Consolidated net income decreased by 14% year-over-year to $2.4 billion.
• Consolidated net revenues decreased by 1% year-over-year to $5.9 billion, primarily due to lower non-interest income.
• Provision for credit losses significantly increased to $0.8 billion from $0.394 billion year-over-year, driven by a credit reserve build in Single-Family due to lower estimated market values and forecasted house price growth rates.
• Single-Family net income decreased by 8% year-over-year to $2.1 billion.
• Multifamily net income decreased by 39% year-over-year to $0.3 billion.
• Multifamily non-interest income decreased by 37% year-over-year, primarily due to lower revenues from held-for-sale loan purchase and securitization activities and impacts from interest-rate risk management activities.
• The Single-Family serious delinquency rate increased to 0.55% at June 30, 2025, from 0.50% at June 30, 2024.
• The Multifamily delinquency rate increased to 0.47% at June 30, 2025, from 0.38% at June 30, 2024, driven by delinquent floating rate loans and small balance loans.
• Net income attributable to common stockholders was a loss of $21 million for Q2 2025.

Risks

• Changes in economic and market conditions, including house prices and house price forecasts.
• Fluctuations in liquidity and mortgage spreads.
• Changes in credit outlook.
• Actions by the U.S. government (FHFA, Treasury, and Congress) and state and local governments.
• Changes in the fiscal and monetary policies of the Federal Reserve.
• Impact of any downgrade in credit ratings for Freddie Mac or the U.S. government.
• Impacts of legislation or regulations and new or amended accounting guidance.
• Impact of banking crises or failures.
• Effects of natural disasters or catastrophic events and actions taken in response thereto on business, results of operations, and financial condition.

Future Outlook

Freddie Mac continues to operate under conservatorship with the FHFA, aiming to build sufficient capital to meet the Enterprise Regulatory Capital Framework requirements before being required to pay dividends to the Treasury. The senior preferred stock liquidation preference is expected to increase to $137.5 billion by September 30, 2025, reflecting capital build during the second quarter of 2025.

Management Comments

• "U.S. Federal Housing is transforming Freddie Mac, making it more efficient and effective, and improving productivity over time."
• "We grew the business in the second quarter, with our mortgage portfolio ending at $3.6 trillion."
• "Earnings for the quarter reflected that growth, as well as the reserve we added to manage our portfolio safely and soundly."
• "The quarters $2.4 billion of earnings further enhanced our safety, taking Freddie Macs net worth to nearly $65 billion."
• "Overall, the company served more than 360,000 homebuyers and renters in the quarter, with 53% of the homes and 95% of rental units affordable to lowand middle-class families."

Industry Context

Freddie Mac's results reflect ongoing efforts to support the U.S. housing market, particularly in providing liquidity and promoting affordability. The increase in credit loss provisions and delinquency rates across both single-family and multifamily segments suggests a potential softening in credit quality or a more cautious outlook on housing market conditions, aligning with broader economic uncertainties. Despite these challenges, the continued growth in the mortgage portfolio and new business activity underscores its critical role in the housing finance ecosystem.

Comparison to Industry Standards

• Freddie Mac's Multifamily delinquency rate of 0.47% at June 30, 2025, is higher than FDIC insured institutions' 90+ day delinquency rate of 0.26% as of March 31, 2025.
• Freddie Mac's Multifamily delinquency rate of 0.47% is significantly lower than the MF CMBS market's 60+ day delinquency rate of 2.36% at June 30, 2025.

Stakeholder Impact

• Shareholders (common): Negative impact due to a net loss attributable to common stockholders and the substantial senior preferred stock liquidation preference, which subordinates common equity.
• Homebuyers and Renters: Positive impact through continued financing of mortgages and rental units, with a high percentage designated as affordable.
• U.S. Treasury: No dividend payment received in June 2025, but the liquidation preference of the senior preferred stock continues to increase, reflecting the company's capital build under conservatorship.

Next Steps

• Freddie Mac will continue to operate under conservatorship with FHFA.
• The company will continue efforts to build sufficient capital to meet the Enterprise Regulatory Capital Framework requirements.
• The senior preferred stock liquidation preference is expected to increase to $137.5 billion on September 30, 2025.

Key Dates

Recommendation

The company reported a net loss attributable to common stockholders of $21 million for the quarter. More critically, Freddie Mac remains under conservatorship, and the senior preferred stock liquidation preference stands at $135.1 billion, significantly exceeding the company's net worth of $64.8 billion. This implies that common equity is deeply underwater and unlikely to realize value in the foreseeable future, as all earnings must first accrue to the senior preferred stock until capital requirements are met. For a seasoned investor, the common stock holds virtually no intrinsic value under these conditions, making it a strong sell.

Keywords

Freddie Mac, mortgage, housing finance, SEC filing, financial results, net income, credit losses, delinquency rates, conservatorship, single-family, multifamily, affordable housing, mortgage portfolio, net worth