Freddie Mac reported $2.4 billion in net income for the second quarter of 2025, down 14% from the same quarter last year and off from Q1’s $2.79 billion, as the company boosted its provision for credit losses on expectations of a cooling housing market.
The higher credit loss provision — $783 million this quarter, versus $394 million a year ago — was “primarily due to modeled and observed house price declines and lower forecasted house price appreciation,” said Freddie Mac Executive Vice President and Chief Financial Officer Jim Whitlinger.
Sharp Cut To Home Price Expectations
On an earnings call this morning, Whitlinger underscored one of the biggest developments of the quarter:
“Our current house price forecast assumes an increase of 1.3% over the next 12 months and 0.4% over the subsequent 12 months. This is a change from our forecast at the end of last quarter, which assumed 4.2% growth over the next 12 months and 2.8% growth over the subsequent 12 months.”
That’s a reduction of almost 70% in near-term expected appreciation, and more than 85% in the following year — shifts that could translate into more conservative underwriting and tighter pricing on higher-LTV or layered-risk loans.
Single-Family Grows Amid Headwinds
Freddie Mac acquired $94 billion in new single-family business during the second quarter of 2025, up from $85 billion a year ago and $78 billion in Q1. Purchase loans made up 81% of volume, refinances 19% — a notable uptick in that latter case from 13% in Q2 2024. That’s similar to changes reported yesterday by fellow GSE Fannie Mae.
The GSE’s net revenues totaled $5.9 billion, down 1% year-over-year, with an 8% rise in net interest income offset by a 42% drop in non-interest income.
Key Metrics For Q2 2025:
- Acquired loans’ average original credit score was 759;
- Average original loan-to-value (LTV) was 77%;
- There was a debt-to-income (DTI) ratio of 45% for 28% of acquisitions, down from 31% YoY;
- First-time homebuyers made up 53% of purchase loans (about 100,000 households);
- The serious delinquency rate was 0.55%, up from 0.50% at the end of Q2 2024 but down from 0.59% in Q1 2025; and
- 24,000 loan workouts were completed (unpaid principal balance of $6.36 billion), up from 18,000 last year.
Whitlinger noted that 62% of the single-family portfolio has some form of credit enhancement. He also said new business activity was boosted by higher conforming loan limits, contributing to larger average loan sizes.
Why Credit Reserves Are Rising
The single-family credit loss allowance rose to $7.5 billion (23 basis points of loans), up from 21 basis points at year-end 2024. Whitlinger attributed this partly to a 0.6% modeled decline in house prices during Q2 and to the reduced home price growth forecast.
That combination, plus higher loss expectations on recent vintages, prompted Freddie to set aside more against potential future losses — something lenders may read as a sign of caution in the months ahead.
Rates Still Weighing on Volume
The 30-year fixed mortgage rate peaked at 6.89% during Q2 and ended at 6.77%, up from 6.65% at the end of Q1 but down slightly from 6.86% at the end of Q2 2024.
Whitlinger acknowledged that “higher mortgage rates continue to impact both purchase and refinance activity” — though refinances have recovered modestly from last year’s lows.
Liquidity Strong, Capital Gap Remains
Freddie’s liquidity stood at $151.6 billion, with $140.2 billion in unused Treasury support under its Purchase Agreement.
However, the GSE remains far short of its Enterprise Regulatory Capital Framework requirements, with a CET1 capital deficit of $136 billion and leverage core capital at 2.5%, below the required 2.7% minimum buffer — keeping dividends to Treasury off the table.
Multifamily: Brief Look
The multifamily segment earned $295 million, down 39% year-over-year, on lower securitization and held-for-sale income. New business volume was $12 billion, with 95% of units affordable to low- and moderate-income renters. Delinquencies rose to 0.47%, led by floating-rate and small balance loans. Ninety-two percent of the portfolio is credit-enhanced.
Mission, But With Caution
Whitlinger emphasized Freddie’s continued role in supporting housing affordability. “Of the 206,000 homebuyers we helped in the quarter, more than 100,000 purchased their very first home,” he noted, adding that 53% of the single-family homes and 95% of eligible rental units Freddie financed “were affordable to low- and moderate-income households.”
That mission focus remains intact — but for mortgage pros, the dramatic cut to Freddie’s home price growth forecast and the build-up in credit reserves point to a more guarded stance ahead, especially for loans with thinner borrower equity or higher leverage.
