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Thursday, July 30, 2026
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Mortgages

Freddie Mac's profit rose 61 percent while its delinquency rate rose too, because the quarter's credit reserve release came from a change in how it generates house price scenarios

Money & World
The Editorial Team ·
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Photo: Quoc Anh Tran Duong / Pexels

Freddie Mac released credit reserves in a quarter when more of its borrowers fell behind.

Net income for the three months to 30 June was $3,838m, up 61 percent on the $2,387m of a year earlier. Net revenues were $5,991m against $5,916m, which is an increase of 1 percent. Two numbers that far apart have to be explained by something between them, and the release explains it.

The credit line did the work

Freddie Mac took a benefit for credit losses of $880m this quarter. A year ago it took a provision of $783m. That is a swing of $1,663m in the company's favour, against a total increase in pre-tax income of $1,799m. The credit line accounts for 92 percent of the improvement.

In the Single-Family segment the two figures match exactly. The credit swing there was $1,468m, and pre-tax income rose by $1,468m. Segment net revenues actually fell, to $5,100m from $5,135m.

The release states the reason for the release itself, and the wording matters: the benefit was "primarily due to a credit reserve release in Single-Family driven by updates to the company's process for generating future house price scenarios". The year-earlier build was attributed to lower estimated property values on the company's internal house price index and lower forecast house price growth. So the same line moved in opposite directions in consecutive years, once because of the housing outlook and once because of how the company generates that outlook.

Delinquencies went the other way

The Single-Family serious delinquency rate was 0.60 percent at the end of the quarter. It was 0.59 percent at 31 December and 0.55 percent a year ago. Multifamily delinquencies were 0.51 percent against 0.44 percent at year end and 0.47 percent a year ago.

Reserve coverage fell in both. Allowance for credit losses as a share of loans outstanding went to 0.19 percent from 0.23 percent in Single-Family, and to 0.36 percent from 0.52 percent in Multifamily.

Rising arrears alongside falling reserves is a combination that resolves itself one way or the other, and this document does not say which.

The business underneath

Volume was strong. Single-Family new business activity was $110bn against $94bn, which the release attributes to refinancing: refinance borrowers numbered 106,000 against 58,000 a year ago, while purchase borrowers slipped to 200,000 from 206,000. Freddie Mac financed 306,000 mortgages in the quarter and says 97,000 of the buyers were purchasing a first home. Credit quality on new business held up, with a weighted average original credit score of 761 and an original loan-to-value ratio of 76 percent.

Multifamily was the faster grower off a smaller base. Net income there was $561m against $295m, revenue rose 14 percent, and the portfolio is up 8 percent to $505bn. The segment has shifted to issuing fully guaranteed securitisations: $22bn of the quarter's $23bn of issuance was fully guaranteed, against $5bn of $14bn a year ago. That change is what lifted net interest income 40 percent, and it also cut guarantee income and loan sale activity.

The conservatorship numbers

Net worth reached $77,769m, up $3,847m in the quarter. The senior preferred stock liquidation preference rose in step, to $146,570m. The remaining Treasury funding commitment is unchanged at $140,162m. Cumulative dividends paid to Treasury remain $119,680m against cumulative draws of $71,648m.

William J. Pulte, the Director of U.S. Federal Housing, chairs the board and is quoted in the release. Kenny Smith is chief executive.

The document: Federal Home Loan Mortgage Corporation (Freddie Mac), second quarter 2026 financial results, Exhibit 99.1 to a Form 8-K, accession 0001026214-26-000047, accepted by EDGAR 2026-07-30 at 08:00:42 Eastern, Items 2.02 and 9.01. Release dated 30 July 2026, McLean, VA, ticker OTCQB: FMCC. Summary of Consolidated Statements of Income and Comprehensive Income, dollars in millions, 2Q 2026 then 1Q 2026 then 2Q 2025: net interest income 6,010 / 5,619 / 5,299; non-interest income (loss) (19) / 514 / 617; net revenues 5,991 / 6,133 / 5,916; (provision) benefit for credit losses 880 / 320 / (783); non-interest expense (2,097) / (2,022) / (2,158); income before income tax expense 4,774 / 4,431 / 2,975; income tax expense (936) / (873) / (588); net income 3,838 / 3,558 / 2,387; comprehensive income 3,847 / 3,538 / 2,408. Conservatorship metrics, in millions, 2Q 2026: net worth 77,769; senior preferred stock liquidation preference 146,570; remaining Treasury funding commitment 140,162; cumulative dividend payments to Treasury 119,680; cumulative draws from Treasury 71,648. Consolidated text, verbatim in part: 'The benefit for credit losses was $0.9 billion for the second quarter of 2026, primarily due to a credit reserve release in Single-Family driven by updates to the company's process for generating future house price scenarios. The provision for credit losses was $0.8 billion for the second quarter of 2025, primarily driven by a credit reserve build in Single-Family attributable to lower estimated market values of single-family properties based on the company's internal house price index and lower forecasted house price growth rates.' Single-Family segment, dollars in millions, 2Q 2026 then 2Q 2025: net interest income 5,449 / 4,898; non-interest income (loss) (349) / 237; net revenues 5,100 / 5,135; (provision) benefit for credit losses 846 / (622), change 1,468; non-interest expense (1,870) / (1,905); income before income tax expense 4,076 / 2,608, change 1,468; net income 3,277 / 2,092, up 57 percent. Single-Family business statistics 2Q 2026 then 1Q 2026 then 2Q 2025: homes funded (thousands) 306 / 281 / 264; purchase borrowers 200 / 165 / 206; refinance borrowers 106 / 116 / 58; affordable to low- to moderate-income families 54 / 53 / 53 percent; first-time homebuyers 52 / 52 / 53 percent; average estimated guarantee fee rate on new business 54 bps throughout; weighted average original LTV 76 / 75 / 77 percent; weighted average original credit score 761 / 758 / 759; loan count 13.9 million throughout; allowance for credit losses to total loans 0.19 / 0.22 / 0.23 percent; credit enhancement coverage 61 / 62 / 62 percent. Serious delinquency rate 0.60 percent, stated in the release as up from 0.59 percent at December 31, 2025 and up from 0.55 percent at June 30, 2025. Single-Family new business activity $110 billion against $94 billion in 2Q 2025, 'primarily driven by an increase in refinance activity', financing 306,000 mortgages and 97,000 first-time homebuyers. Multifamily segment, dollars in millions, 2Q 2026 then 2Q 2025: net interest income 561 / 401; non-interest income 330 / 380; net revenues 891 / 781; (provision) benefit for credit losses 34 / (161); non-interest expense (227) / (253); income before income tax expense 698 / 367; net income 561 / 295, up 90 percent. Multifamily new business activity $18 billion against $12 billion; mortgage portfolio $505 billion, up 8 percent; delinquency rate 0.51 percent, up from 0.44 percent at December 31, 2025 and up from 0.47 percent at June 30, 2025; 133,000 rental units financed, 72 percent affordable to low-income families and 91 percent to low- to moderate-income families; securitization issuance $23 billion of which $22 billion fully guaranteed against $5 billion fully guaranteed a year earlier; allowance for credit losses to total loans 0.36 percent against 0.52 percent. Headline metrics: market liquidity provided $128 billion, homes and rental units financed 439,000, net worth $78 billion, total mortgage portfolio $3.7 trillion. Quoted in the release: William J. Pulte, Director, U.S. Federal Housing and Chair of the Board of Directors, Freddie Mac; Kenny Smith, CEO of Freddie Mac. Release read in full 30 July 2026. Arithmetic performed by this desk from the table and not taken from the release: consolidated pre-tax income change of 1,799 against a credit swing of 1,663, which is 92.4 percent; net revenues change 75 and non-interest expense change 61, and 75 plus 61 plus 1,663 equals 1,799..

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