Sign in

You're signed outSign in or to get full access.

FH

FEDERAL HOME LOAN MORTGAGE CORP (FMCC)·Q1 2025 Earnings Summary

Executive Summary

  • Net revenues of $5.85B and net income of $2.79B; consolidated YoY growth modest (+2% revenues, +1% net income) while sequentially down vs Q4 on lower non-interest income and higher credit loss provision . EPS to common was -$0.01 due to senior preferred allocations exceeding net income, despite strong operating profit .
  • Revenue materially beat Wall Street consensus ($5.85B vs $5.16B), while EPS was a slight miss (consensus $0.00 vs -$0.01); strength was driven by higher net interest income, offset by weaker Multifamily non-interest income and Single-Family reserve build *.
  • Single-Family delivered a robust quarter: net income $2.3B (+16% YoY), new business activity $78B (+26% YoY), and credit enhancement coverage at 62%; serious delinquencies remained low at 0.59% .
  • Multifamily softened: net revenues $0.93B (-27% YoY), net income $0.53B (-35% YoY), and delinquency rose to 0.46% driven by floating-rate loans; fully guaranteed securitizations increased and portfolio guarantee fee rate rose to 52 bps .
  • Catalysts: FHFA-led operational streamlining expected to lower G&A and support affordability; management signaled increased technology investment and machine learning automation in underwriting to reduce origination costs and cycle times .

What Went Well and What Went Wrong

What Went Well

  • Single-Family momentum: net income $2.3B (+$316M YoY), net revenues $4.9B (+10% YoY); new business activity $78B (+$16B YoY) driven by expanded market coverage, higher conforming limits, and HPA .
  • Credit enhancement strength: 62% of Single-Family portfolio and 93% of Multifamily portfolio covered, limiting loss exposure; 98% of delinquent Multifamily loans had credit enhancement .
  • Management tone on efficiency: “We expect the savings associated with FHFA's new direction to reduce Freddie Mac's general and administrative expenses in 2025 and beyond... enable Freddie Mac to invest more in critical technology” .

What Went Wrong

  • Multifamily pressure: net revenues fell to $0.93B (-$0.35B YoY) and net income to $0.53B (-$0.29B YoY), primarily from lower held-for-sale purchase/securitization revenues, interest-rate risk management impacts, and less favorable fair value changes .
  • Higher credit loss provision: consolidated provision rose to $0.28B vs $0.18B in 1Q24, driven by Single-Family reserve build on new acquisitions; Single-Family provision was $0.23B vs $0.12B in 1Q24 .
  • Delinquency uptick: Multifamily delinquency rate increased to 0.46% (vs 0.34% a year ago), tied to floating-rate and small balance loans in their floating period; Single-Family serious delinquency rose YoY to 0.59% (flat QoQ) with lingering hurricane impacts .

Financial Results

MetricQ1 2024Q4 2024Q1 2025
Net Revenues ($USD Billions)$5.76 $6.33 $5.85
Net Interest Income ($USD Billions)$4.76 $5.05 $5.10
Non-Interest Income ($USD Billions)$1.00 $1.28 $0.75
Provision for Credit Losses ($USD Billions)$0.18 $0.09 $0.28
Non-Interest Expense ($USD Billions)$2.12 $2.22 $2.09
Net Income ($USD Billions)$2.77 $3.22 $2.79
EPS ($USD)$0.01 $0.01 -$0.01
Net Income Margin (%)48.1% 50.9% 47.7%

Segment breakdown

Segment MetricQ1 2024Q4 2024Q1 2025
Single-Family Net Revenues ($USD Billions)$4.47 $5.20 $4.92
Single-Family Net Income ($USD Billions)$1.95 $2.56 $2.26
Multifamily Net Revenues ($USD Billions)$1.28 $1.13 $0.93
Multifamily Net Income ($USD Billions)$0.82 $0.67 $0.53

KPIs

KPIQ1 2024Q4 2024Q1 2025
Single-Family New Business Activity ($USD Billions)$62 $100 $78
Single-Family Serious Delinquency Rate (%)0.52 0.59 0.59
Multifamily New Business Activity ($USD Billions)$9 $30 $10
Multifamily Delinquency Rate (%)0.34 0.40 0.46
Single-Family Credit Enhancement Coverage (%)61 62 62
Multifamily Credit Enhancement Coverage (%)94 91 93
Net Worth ($USD Billions)$50.46 $59.58 $62.40

Estimate comparisons (Q1 2025)

MetricConsensusActual
Revenue ($USD Billions)$5.16*$5.85
Primary EPS ($USD)$0.00*-$0.01

*Values retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
House Price Forecast (YoY)Next 12 months+2.7% (as of Q4 2024) +4.2% (as of Q1 2025) Raised
House Price Forecast (YoY)Subsequent 12 months+3.3% (as of Q4 2024) +2.8% (as of Q1 2025) Lowered
G&A / Operating ExpensesFY 2025Not specifiedExpect reductions from FHFA streamlining; invest more in tech Qualitative reduction
Revenue/Margins/Tax/DividendsFY/QtrNot providedNot providedMaintained “no formal guidance” posture

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2: Q3 2024, Q-1: Q4 2024)Current Period (Q1 2025)Trend
AI/Technology initiativesLimited in filings; no explicit AI focus Machine learning automations in LPA, income calculator, cost and cycle time reductions ; CFO to “invest more in critical technology” Accelerating
Regulatory/Legal (FHFA actions)Standard conservatorship disclosures Director Pulte streamlining operations, eliminating nonessential activities; expected G&A savings Increasing regulatory-driven efficiency
Macro: mortgage ratesPMMS 30-year ~6.85% at 12/31/24 PMMS 30-year 6.65% at 3/31/25; refinance share up to 21% Improving rates support refi volumes
Credit performance (SF/MF)SF serious delinquency 0.54%; MF 0.39% SF 0.59% (flat QoQ, up YoY) ; MF 0.46% (up YoY) on floating-rate loans SF stable-low; MF deteriorating modestly
Single-Family volumesNew business $98B (Q3) ; $100B (Q4) $78B (Q1), up YoY, seasonal down QoQ Strong YoY, sequential normalization
Multifamily securitization mixFully guaranteed rising (45% in 2024) Fully guaranteed 56% of Q1 securitizations; higher portfolio G-fee Mix shift to fully guaranteed

Management Commentary

  • “Freddie Mac delivered a solid performance, earning $2.8 billion of net income… Our first quarter net interest income was $5.1 billion, up 7% year-over-year… Noninterest income… declined… primarily due to a decrease in net investment gains in multifamily” — CFO Jim Whitlinger .
  • “We expect the savings associated with FHFA's new direction to reduce Freddie Mac's general and administrative expenses in 2025 and beyond… enable Freddie Mac to invest more in critical technology, increase our net worth and lower the cost of originating a mortgage” — CFO Jim Whitlinger .
  • “Freddie Mac earned $2.8 billion of net income… FHFA is working with Freddie Mac to streamline its operations… supporting mortgage affordability while building an even safer, sounder Freddie Mac” — William J. Pulte, Chair of the Board .

Q&A Highlights

  • The call was a prepared remarks webcast with media; management emphasized FHFA-driven operational streamlining and expected G&A savings; no separate analyst Q&A disclosures were provided .
  • Clarifications embedded in remarks: higher Single-Family reserve build tied to new acquisitions, refinance share rising with lower rates, and Multifamily non-interest income weakness linked to securitization and hedging impacts .
  • Portfolio credit enhancement coverage and delinquency dynamics were reiterated, including the concentration of Multifamily delinquencies in floating-rate exposures .

Estimates Context

  • Revenue beat: Actual net revenues $5.85B vs consensus $5.16B; positive surprise driven by stronger net interest income and portfolio growth, partially offset by weaker non-interest income (Multifamily) *.
  • EPS miss: Consensus $0.00 vs actual -$0.01; the EPS outcome for common reflects senior preferred allocations exceeding net income despite robust profitability *.
  • Implications: Street may need to lift revenue run-rate for Single-Family given volume and net interest trajectory, while lowering Multifamily non-interest expectations and factoring higher Single-Family provisions tied to new acquisitions *.

*Values retrieved from S&P Global.

Key Takeaways for Investors

  • Single-Family is the earnings engine: strong net interest income, healthy credit characteristics, and rising credit enhancement coverage support resilient profitability even with reserve builds .
  • Multifamily remains the swing factor: expect continued pressure in non-interest income and higher delinquency from floating-rate loans, partly mitigated by greater fully guaranteed securitizations and higher G-fees .
  • Regulatory streamlining is a margin lever: FHFA-prompted cost cuts should reduce G&A in 2025+, enabling reinvestment in technology and potential spread capture—an emerging medium-term positive .
  • Technology adoption is tangible: machine learning-driven underwriting and tools (LPA, income calculator) can lower origination costs and cycle times, potentially boosting market coverage and volumes .
  • Estimate resets likely: raise revenue forecasts for Single-Family and temper Multifamily non-interest assumptions; incorporate modestly higher credit provisioning tied to new acquisitions *.
  • Trading lens: near-term strength in net interest income and Street revenue beat offset EPS optics; watch headlines on FHFA actions and Multifamily credit as primary stock narrative drivers .
  • Capital build continues: net worth rose to $62.4B; senior preferred liquidation preference will increase to $135.1B at 6/30/25, underscoring the ongoing conservatorship capital framework dynamics .