Q2 2026 Federal Home Loan Mortgage Corp Earnings Call

July 30, 2026

Speaker #1: Director of Financial Communications. We are 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. Whitlinger may make forward-looking statements based on assumptions about the company's key business drivers and other factors.

Speaker #1: Changes in these factors could cause the company's actual results to vary materially from its expectations. A description of those factors can be found in the company's quarterly report on Form 10-Q, filed today, you will find the 10-Q, earnings press release, and related materials posted on the Investor Relations section of Freddie Mac dot com.

Speaker #1: Good morning, and thanks for joining us for a presentation of Freddie Mac's second quarter 2026 financial results. I'm Fred Solomon, Director of Financial Communications.

Speaker #1: This call is recorded and a replay will soon be available on Freddie Mac dot com. We ask that this call not be rebroadcast or transcribed.

Speaker #1: Vice President and Chief Financial Officer, Jim Whitlinger. Before we begin, we'd like to point out that during the call, Mr. Whitlinger may make forward-looking statements based on assumptions about the company's key business drivers and other factors.

Speaker #1: With that, I'll turn the call over to Freddie Mac CFO, Jim Whitlinger.

Speaker #2: Good morning, and thank you for joining our call to review Freddie Mac's second quarter financial results. To help you follow along throughout today's remarks, I'll reference our published second quarter financial supplement and earnings presentation.

Speaker #2: As you can see on slide 2 of today's presentation, Freddie Mac delivered solid second quarter results. We are in 3.8 billion dollars of net income, taking our net worth to nearly 78 billion dollars.

Speaker #2: The total mortgage portfolio increased to 3.7 trillion dollars, as we provided about 128 billion dollars of liquidity to the U.S. housing market. Freddie Mac's support during the second quarter helped nearly 439,000 families buy refinance or rent a home.

Speaker #1: This call is recorded, and a replay will soon be available on Freddie Mac dot com. We ask that this call not be rebroadcast or transcribed.

Speaker #1: With that, I'll turn the call over to Freddie Mac CFO, Jim Whitlinger.

Speaker #2: The majority of the houses and apartments we financed in the quarter were affordable to working families earning 120% or less of varying median income.

Speaker #2: These included 91% of eligible rental units, and 54% of single-family homes, of the home buyers purchasing a primary residence, 52% were first-time homeowners. Against the still-resilient economic backdrop, we remained focused on disciplined risk management as well as our mission to promote liquidity, stability, and affordability in the U.S.

Speaker #2: housing finance system. Now, let's look at the quarterly financial results that support this important work. I'll begin with our second quarter 2026 results, followed by our single-family and multi-family segments performance.

Speaker #2: The majority of the houses and apartments refinanced in the quarter were affordable to working families earning 120 percent or less of varying median income.

Speaker #2: I'll finish with an update on our net worth and regulatory capital. We'll start on slide 3 with our second quarter 2026 financial performance, our net income of 3.8 billion dollars, increased 61% year over year, reflecting higher net revenues from our net interest income, lower non-interest expense, and a credit reserve release in the current period.

Speaker #2: These included 91 percent of eligible rental units, and 54 percent of single-family homes. Of the homebuyers purchasing a primary residence, 52 percent were first-time homeowners.

Speaker #2: Against the still-resilient economic backdrop, we remained focused on disciplined risk management as well as our mission to promote liquidity, stability, and affordability in the U.S.

Speaker #2: These results reflect solid execution during the quarter. We grew net revenues 1% year over year, to $6 billion. Primarily driven by a $711 million or 13% increase in net interest income from the prior year quarter.

Speaker #2: This increase was driven by higher income from continued growth in our mortgage portfolio, which increased 2% year over year, coupled with an increase in fully guaranteed multi-family securitizations following our business strategy change.

Speaker #2: I'll finish with an update on our net worth and regulatory capital. We'll start on slide 3 with our second quarter 2026 financial performance, our net income of 3.8 billion dollars, increased 61 percent year over year, reflecting higher net revenues from our net interest income, lower non-interest expense, and a credit reserve release in the current period.

Speaker #2: Our net interest yield increased 7 basis points year over year, to $69 basis points. Reflecting the positive impact of our scale. Non-interest income shifted from income of $617 million in second quarter 2025 to a loss of $19 million in second quarter 2026.

Speaker #2: These results reflect solid execution during the quarter. We grew net revenues 1 percent year over year, to 6 billion dollars. Primarily driven by a $711 million or 13 percent increase in net interest income from the prior year quarter.

Speaker #2: This was primarily due to net investment losses in second quarter 2026 compared to net investment gains in the prior year quarter, as well as lower guarantee income.

Speaker #2: This increase was driven by higher income from continued growth in our mortgage portfolio, which increased 2 percent year over year, coupled with an increase in fully guaranteed multi-family securitizations following our business strategy change.

Speaker #2: We recorded an $880 million benefit for credit losses in the quarter, compared with a $783 million provision in the prior year quarter. The benefit resulted primarily from a single-family reserve release, driven by updates to the company's process for generating future house price scenarios.

Speaker #2: Our net interest yield increased 7 basis points year over year, to 69 basis points. Reflecting the positive impact of our scale. Non-interest income shifted from income of $617 million in second quarter 2025 to a loss of $19 million in second quarter 2026.

Speaker #2: By comparison, the second quarter 2025 provision primarily reflected a reserve build in single-family, attributable to lower estimated property market values based on the company's internal house price index and lower forecasted house price growth rates.

Speaker #2: This was primarily due to net investment losses in second quarter 2026 compared to net investment gains in the prior year quarter, as well as lower guarantee income.

Speaker #2: Our second quarter non-interest expense was 2.1 billion dollars, down 3% year over year, reflecting continued focus on operational efficiency. We grew our total mortgage portfolio to 3.7 trillion dollars as of June 30, driven by 1.8% increases respectively in our single-family and multi-family portfolios year over year.

Speaker #2: Turning to single-family results on slide 4, the segment reported strong second quarter net income of 3.3 billion dollars, an increase of 57% year over year.

Speaker #2: The 2025 provision primarily reflected a reserve build in single-family, attributable to lower estimated property market values based on the company's internal house price index and lower forecasted house price growth rates.

Speaker #2: This increase reflects a credit loss benefit this quarter, compared with a provision in the prior year quarter. Segment net interest income for the quarter of 5.4 billion dollars was up 11% or 551 million year over year, driven by a 1% increase in our single-family mortgage portfolio, and lower expense related to debt and hedge accounting relationships.

Speaker #2: Our second quarter non-interest expense was 2.1 billion dollars, down 3 percent year over year, reflecting continued focus on operational efficiency. We grew our total mortgage portfolio to 3.7 trillion dollars as of June 30, driven by 1.8 percent increases respectively in our single-family and multi-family portfolios year over year.

Speaker #2: The increase in the net interest income was offset by investment losses in the quarter, primarily driven by impacts from interest rate management activities. We recorded an $846 million benefit for credit losses in the quarter, compared with a $622 million provision in the second quarter of 2025.

Speaker #2: Turning to single-family results on slide 4, the segment reported strong second quarter net income of 3.3 billion dollars, an increase of 57 percent year over year.

Speaker #2: This increase reflects a credit loss benefit this quarter, compared with a provision in the prior year quarter. Segment net interest income for the quarter of 5.4 billion dollars was up 11 percent or 551 million year over year, driven by a 1 percent increase in our single-family mortgage portfolio, and lower expense related to debt and hedge accounting relationships.

Speaker #2: Once again, this benefit is related to updates to the company's process for generating future house price scenarios. House prices rose by 0.7% during the second quarter 2026, compared with a 0.2% decrease in second quarter 2025.

Speaker #2: Our current forecast assumes house prices will grow by 1.7% over the next 12 months, and 2.1% over the subsequent 12 months. This was more than our December 2025 forecast, which projected increases of 0.5% and 1.4% respectively, in 2025 provision was mainly due to a reserve build attributable to lower estimated property market values based on the company's internal house price index, and lower forecasted house price growth rates.

Speaker #2: The increase in net interest income was offset by investment losses in the quarter, primarily driven by impacts from interest rate management activities. We recorded an $846 million benefit for credit losses in the quarter, compared with a $622 million provision in the second quarter of 2025.

Speaker #2: Once again, this benefit is related to updates to the company's process for generating future house price scenarios. House prices rose by 0.7 percent during the second quarter 2026, compared with a 0.2 percent decrease in second quarter 2025.

Speaker #2: The single-family allowance for credit losses coverage ratio was 19 basis points at the end of second quarter 2026. That was down 4 basis points year over year, and down 3 basis points quarter over quarter.

Speaker #2: Our current forecast assumes house prices will grow by 1.7 percent over the next 12 months and 2.1 percent over the subsequent 12 months. This was more than our December 2025 forecast, which projected increases of 0.5 percent and 1.4 percent respectively, in contrast to the second quarter 2025 provision was mainly due to a reserve build attributable to lower estimated property market values based on the company's internal house price index, and lower forecasted house price growth rates.

Speaker #2: Net charge-offs for the quarter totaled $116 million, compared with $73 million in the prior year quarter. Our single-family portfolio credit characteristics remained strong, supported by meaningful credit enhancement coverage and our ongoing focus on sustainable risk management across market cycles.

Speaker #2: In the second quarter, our single-family portfolio had a weighted average current loan-to-value ratio of 53%, and a weighted average credit score of 755. The serious delinquency rate was 60 basis points as of June 30, 2026.

Speaker #2: That was a 5 basis point increase over the prior year, and flat quarter over quarter. The year over year increase is primarily due to a higher serious delinquency rate for loans originated during 2022 and later.

Speaker #2: During the second quarter 2026, we originated $110 billion of new business, driven by strength in refinance activity. Refinance loans accounted for 33% of total volume.

Speaker #2: In the second quarter, our single-family portfolio had a weighted average current loan-to-value ratio of 53 percent, and a weighted average credit score of 755.

Speaker #2: Mortgage rates ended the quarter at 6.49% after reaching a high of 6.53 during the quarter, the highest since the beginning of the year and up from a low of 5.98% we observed during first quarter 2026.

Speaker #2: The serious delinquency rate was 60 basis points as of June 30, 2026. That was a 5 basis point increase over the prior year, and flat quarter over quarter.

Speaker #2: While elevated mortgage rates continued to affect market activity, we remained focused on supporting market liquidity and access to affordable, sustainable housing finance. As you can see on slide 5, the credit profile of our single-family new business remained strong, with an average estimated loan-to-value ratio of 76%, down 1 percentage point year over year.

Speaker #2: The year over year increase is primarily due to a higher serious delinquency rate for loans originated during 2022 and later. During the second quarter, 2026, we originated $110 billion of new business, driven by strength in refinance activity.

Speaker #2: Refinance loans accounted for 33 percent of total volume. Mortgage rates ended the quarter at 6.49 percent after reaching a high of 6.53 during the quarter, the highest since the beginning of the year and up from a low of 5.98 percent we observed during first quarter 2026.

Speaker #2: The weighted average credit score was 761 as of June 30, up 2 points from a year ago. The weighted average DTI ratio trend also improved year over year, these indicators reinforced the quality of our new originations.

Speaker #2: During the second quarter 2026, we held approximately 22,000 families remaining in their homes through loan workouts. At the end of the second quarter, 61% of our single-family portfolio had some form of credit enhancement.

Speaker #2: Moving to multi-family results on slide 6, the segment delivered second quarter 2026 net income of $561 million. Up 90% year over year. The increase was supported by higher net revenues and a slight benefit for credit losses in the quarter versus a provision in the prior year quarter.

Speaker #2: Second quarter net revenues increased 14% year over year, to $891 million. Benefiting from higher net interest income. Net interest income increased 40%, driven by higher guaranteed interest income as our business strategy shifted toward fully guaranteed securitizations, which is expected to enhance the stability of multi-family earnings over time.

Speaker #2: During the second quarter 2026, we held approximately 22,000 families remained in their homes through loan workouts. At the end of the second quarter, 61 percent of our single-family portfolio had some form of credit enhancement.

Speaker #2: Moving to multi-family results on slide 6, the segment delivered second quarter 2026 net income of $561 million. Up 90 percent year over year. The increase was supported by higher net revenues and a slight benefit for credit losses in the quarter versus a provision in the prior year quarter.

Speaker #2: This increase in net interest income was offset by a 13% decline in non-interest income as the revenue mix shifted due to the business strategy change.

Speaker #2: On the credit side, we recorded a 34 million dollar benefit for credit losses. In the prior year quarter, we had an expense of $161 million, which was attributable to new loan purchase commitment and acquisition activity, coupled with deterioration in the credit performance of certain delinquent loans.

Speaker #2: Second quarter net revenues increased 14 percent year over year, to $891 million, benefiting from higher net interest income. Net interest income increased 40 percent, driven by higher guarantee interest income, as our business strategy shifted toward fully guaranteed securitizations, which is expected to enhance the stability of multifamily earnings over time.

Speaker #2: The multi-family allowance for credit losses coverage ratio was 36 basis points at the end of the second quarter 2026, compared with 42 basis points for the first quarter 2026, and 52 basis points for second quarter 2025.

Speaker #2: This increase in net interest income was offset by a 13% decline in non-interest income, as the revenue mix shifted due to the business strategy change.

Speaker #2: Total multi-family new business activity reached $18 billion, and second quarter 2026. That was an increase of 58% from the prior year's quarter, primarily driven by a larger new business pipeline entering 2026.

Speaker #2: Coupled with the execution of multi-family's competitive strategies, year-to-date, 66% of this activity-based on unpaid principal balance has been mission-driven affordable housing. During second quarter 2026, we securitized $23 billion of loans, nearly all of those were fully guaranteed securitizations in line with our business strategy change marking a 59% increase year over year.

Speaker #2: The average guarantee fee rate on our total guarantee exposures increased to 59 basis points for the quarter, up 6 basis points from the prior year.

Speaker #2: Total multi-family new business activity reached $18 billion, in second quarter 2026. That was an increase of 58 percent from the prior year's quarter, primarily driven by a larger new business pipeline entering 2026.

Speaker #2: This increase was primarily due to continued growth in our fully guaranteed securitization issuances, for which we charge higher guarantee fee rates. Our multi-family mortgage portfolio at the end of the second quarter 2026 was $505 billion, an increase of 8% year over year.

Speaker #2: Coupled with the execution of multi-family's competitive strategies, year to date, 66 percent of this activity-based on unpaid principal balance has been mission-driven affordable housing.

Speaker #2: During second quarter 2026, we securitized $23 billion of loans, nearly all of those were fully guaranteed securitizations in line with our business strategy change, marking a 59 percent increase year over year.

Speaker #2: The multi-family delinquency rate at the end of the second quarter was 51 basis points, this was up compared with 47 basis points at the end of second quarter 2025, and 43 basis points last quarter.

Speaker #2: The average guarantee fee rate on our total guarantee exposures increased to 59 basis points for the quarter, up 6 basis points from the prior year.

Speaker #2: This increase is primarily due to stress associated with elevated interest rates and small balance loans. 91% of the delinquent loans in the multi-family mortgage portfolio had credit enhancement coverage, reducing our credit exposure.

Speaker #2: At the end of the second quarter, 92% of the multi-family mortgage portfolio was covered by credit enhancements. Finally, as shown on slide 7 of our earnings presentation, we delivered strong net worth growth, ending the quarter at 78 billion dollars, up 20% year over year, and further strengthening our capital position.

Speaker #2: This continued capital build enhances our resilience and long-term capacity to serve the market through changing conditions and advance our mission with discipline. Under our regulatory capital rule, total capital required at quarter end was $161 billion, including $60 billion of stress and stability buffers.

Speaker #2: This increase is primarily due to stress associated with elevated interest rates and small balance loans. 91 percent of the delinquent loans in the multi-family mortgage portfolio had credit enhancement coverage, reducing our credit exposure.

Speaker #2: We are making progress, reducing our capital deficit, which has come down 41 billion dollars since the end of 2022. Excluding buffers, our capital shortfall was $101 billion, at the end of the second quarter, largely because the 73 billion dollars of senior preferred stock does not qualify as regulatory capital.

Speaker #2: At the end of the second quarter, 92 percent of the multi-family mortgage portfolio was covered by credit enhancements. Finally, as shown on slide 7 of our earnings presentation, we delivered strong net worth growth, ending the quarter at $78 billion, up 20 percent year over year, and further strengthening our capital position.

Speaker #2: This continued capital build enhances our resilience in long-term capacity to serve the market through changing conditions and advance our mission with discipline. Under our regulatory capital rule, total capital required at quarter end was $161 billion, including $60 billion of stress and stability buffers.

Speaker #2: But what you additionally heard was that none of those institutions were satisfied to let those economic factors equal destiny for their firms, and again, that also applies to Freddie Mac.

Speaker #2: We are making progress, reducing our capital deficit, which has come down 41 billion dollars since the end of 2022, excluding buffers, our capital shortfall was $101 billion, at the end of the second quarter, largely because the $73 billion of senior preferred stock does not qualify as regulatory capital.

Speaker #2: We are continuously improving our systems and policies to bring loans in the door in all economic environments, while maintaining a bedrock commitment to risk management.

Speaker #2: This applies to big, highly visible changes, like the introduction of new credit scoring models. And it also applies to smaller incremental changes to reduce our risks, such as moving services to near real-time default reporting.

Speaker #2: I'll conclude my remarks with one final thought. It was a very successful quarter for many of the nation's largest financial institutions. If you listened to their versions of this call, you would have heard them talk about the macroeconomic or cyclical factors affecting their strong results, that's also true of Freddie Mac, but what you additionally heard was that none of those institutions were satisfied to let those economic factors equal destiny for their firms, and again, that also applies to Freddie Mac.

Speaker #2: These changes are being driven by motivated Freddie Mac employees committed to deploying the latest technology, including thoughtful use of artificial intelligence in their day-to-day work.

Speaker #2: We are streamlining loan processing, accelerating software development, strengthening fraud detection, and helping employees make faster, more informed decisions. Smart use of AI is the key to allowing our employees to further our mission and shape what comes next.

Speaker #2: We are continuously improving our systems and policies to bring loans in the door in all economic environments, while maintaining a bedrock commitment to risk management.

Speaker #2: These changes are being driven by motivated Freddie Mac employees committed to deploying the latest technology, including software use of artificial intelligence in their day-to-day work.

Q2 2026 Federal Home Loan Mortgage Corp Earnings Call

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