Credit reserve releases and revenue growth in single-family business drive quarterly gains
Freddie Mac reported a strong third quarter for 2024, driven largely by gains in its single-family business.
Net income rose to $3.11 billion, up 12.3% from Q2, with single-family lending contributing $2.6 billion, according to the mortgage giant’s financial report.
The rise was primarily driven by the company’s single-family business, which contributed $2.6 billion in net income, reflecting continued strength in this segment as well as adjustments in credit reserves due to declining mortgage rates.
While overall revenues saw a slight decrease from Q2, Freddie Mac benefited from a $191 million credit loss adjustment in the third quarter, following a $394 million negative mark in the previous quarter. This adjustment included a credit reserve release within Freddie’s single-family division due to falling interest rates, which helped offset some revenue dips.
Single-family growth
The single-family segment saw its net income climb to $2.6 billion, up 11% year-over-year, with total revenues reaching $5.1 billion – a 3% increase. Net interest income for this segment rose to $4.7 billion, reflecting improved expense management in hedge accounting. The average guarantee fee for new single-family business in Q3 rose by three basis points to 57.
A notable contributor to Freddie Mac’s profitability in Q3 was the $100 million benefit for credit losses in the single-family division. This gain was largely attributed to a credit reserve release triggered by reduced mortgage interest rates, improving Freddie Mac’s bottom line.
Mixed results in multifamily
In its multifamily segment, Freddie Mac posted net income of $500 million, up 47% year over year. Quarterly revenue in this segment grew by 2% to $800 million, with higher net interest income helping offset lower non-interest income. Credit loss provisions in multifamily also saw an improvement, with a $92 million reserve release following enhancements in Freddie Mac’s credit loss estimation process.
Read next: Fannie posts Q3 earnings
Freddie’s Q3 financials also benefited from a significant reduction in non-interest expenses, down to $2.2 billion from last year, which had included a $313 million one-time expense.
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