Key Takeaways:
Freddie Mac reported second-quarter net income of $3.8 billion, up 61% from a year earlier, as an $880 million credit reserve release and higher net interest income lifted results.
"Freddie Mac delivered strong second quarter financial results, reflecting the strength of the business and disciplined execution against our priorities," Bill Pulte, director of the Federal Housing Finance Agency and chairman of Freddie Mac's board, said.
Net revenues rose 1% to $6.0 billion, with net interest income up 13% to $6.0 billion and net interest yield at 69 basis points. Non-interest income swung to a $19 million loss from $617 million in income a year earlier, while non-interest expense fell 3% to $2.1 billion.
Net worth climbed 20% to $77.8 billion, lifting the senior preferred stock liquidation preference to $146.6 billion, set to reach $150.4 billion on Sept. 30. Shares were unchanged at $28.40, leaving the stock about 25% below its 52-week high of $37.80.
The Single-Family segment generated $3.3 billion of net income, up 57%, on $5.1 billion of net revenues. New business activity reached $110 billion, up from $94 billion a year earlier, driven by refinance volume that doubled to 106,000 borrowers. The segment recorded an $846 million credit benefit versus a $622 million provision a year earlier after Freddie Mac revised its house-price scenario process. The company now expects home prices to rise 1.7% over the next 12 months and 2.1% in the following 12 months, up from prior forecasts of 0.5% and 1.4%.
Multifamily net income jumped 90% to $561 million as the segment shifted toward fully guaranteed securitizations, which carry higher guarantee fees. New business activity rose 58% to $18 billion, financing 133,000 rental units, with 91% of eligible units affordable to low- and moderate-income families.
Credit quality showed some pressure. The single-family serious delinquency rate rose to 0.60% from 0.55% a year earlier, and multifamily delinquency climbed to 0.51%. Credit enhancements covered 61% of the single-family portfolio and 92% of multifamily.
The results highlight a widening gap between accounting net worth and regulatory capital. Adjusted total capital stood at $0.5 billion against a $161 billion requirement including buffers, leaving a $101 billion shortfall excluding buffers because the $73 billion of senior preferred stock does not qualify as regulatory capital. Investors will watch whether the FHFA advances any recapitalization framework that could alter the senior preferred claim, which is scheduled to rise to $150.4 billion on Sept. 30.
This article is for informational purposes only and does not constitute investment advice.
