Freddie Mac Reports Net Income of $2.5 Billion and

Comprehensive Income of $2.4 Billion for Second Quarter 2018

Comprehensive income, excluding a significant item(1), was $2.2 Billion for Second Quarter 2018 

Another Strong and Stable Quarter Demonstrates a Transformed Company Delivering on Its Mission and Improving Housing Finance

Second Quarter 2018 Financial Results

• $2.4 billion of comprehensive income: Driven by strong business revenues and a $334 million (pre-tax), or $264 million

(after-tax), favorable litigation judgment. Market-related impacts plus gains from legacy asset dispositions continued to be 

modest at $0.3 billion (pre-tax), or $0.2 billion (after-tax), partially due to targeted efforts to reduce volatility in the company's 

GAAP earnings. 

Comprehensive income, excluding the effect of significant items(1), remained reasonably stable over the last several quarters 

despite market volatility.

• $1.6 billion dividend requirement to the U.S. Treasury after exceeding the $3.0 billion applicable Capital Reserve Amount.

• Strong guarantee book growth: Total guarantee portfolio grew 6 percent from the prior year, to nearly $2.1 trillion.

• Mortgage-related investments portfolio decreased to $236 billion, below the 2018 year-end Purchase Agreement cap of

$250 billion.

CEO Commentary

“Freddie Mac’s transformation continued in the second quarter, with good business results and similarly good financial 

performance. In business operations, our guarantee book grew significantly, credit quality was high, and we are generating a 

consistent stream of new innovations for our customers. On the financial side, we produced strong earnings with a growing track 

record of quarterly stability. These together provide the foundation necessary so Freddie Mac can effectively deliver on all aspects 

of its mission and, more broadly, improve America's housing finance system.”

Donald H. Layton Chief Executive Officer

Second Quarter 2018 Business Highlights

Producing Solid Results through Strong Business Fundamentals 

• New origination volumes: Single-family new originations of $84 billion; purchase volume up 29 percent from the prior year,

while refinance volume down 7 percent. Multifamily new originations of nearly $16 billion, up 13 percent from the prior year. 

• Credit quality remains strong: Single-family serious delinquency rate dropped to 0.82 percent, the lowest rate since early

2008. Multifamily delinquency rate remained at historical lows, near zero at 0.01 percent.

Reducing Taxpayer Exposure through Credit Risk Transfer

• Single-family: Cumulatively transferred a portion of credit risk on more than $1 trillion of single-family mortgages. For

originations in the twelve months ended June 30, 2017, CCF capital required for credit risk(2) was reduced approximately 60 

percent(3) by credit risk transfer transactions; the company plans similar risk reduction transactions for this quarter's 

originations.

• Multifamily: Cumulatively transferred a large majority of credit risk on the multifamily guarantee portfolio. For originations in

the twelve months ended June 30, 2017, CCF capital required for credit risk(2) was reduced approximately 90 percent(3) by 

credit risk transfer transactions; the company plans similar risk reduction transactions for this quarter's originations.

Delivering on the Company's Mission by Responsibly Expanding Opportunities for U.S. Homebuyers and Renters

• Provided approximately $103 billion in liquidity to the mortgage market in the second quarter of 2018. Continued to expand

access for homebuyers and renters by funding nearly 362,000 single-family homes and 191,000 multifamily rental units in the 

second quarter of 2018.

Support for first-time homebuyers was at the highest level in the last ten years, at more than 46 percent of new purchase loans.

87 percent of the eligible multifamily rental units financed were affordable to families earning at or below area median incomes.

Portfolio Balance (Dollars in billions) 2Q 2018 1Q 2018 Change 2Q 2017 Change

Single-family credit guarantee portfolio $1,855 $1,836 1 % $1,784 4 %

Multifamily guarantee portfolio 220 213 3 % 174 26 %

Total guarantee portfolio $2,075 $2,049 1 % $1,958 6 %

Mortgage-related investments portfolio $236 $241 (2)% $284 (17)%

Comprehensive income (Dollars in millions) 2Q 2018 1Q 2018 Change 2Q 2017 Change

GAAP comprehensive income $2,435 $2,150 $285 $1,986 $449

Significant items:

Non-agency mortgage-related securities judgment (334) — (334) — (334)

Tax effect related to judgment 70 — 70 — 70

Total significant items (264) — (264) — (264)

Comprehensive income, excluding significant items(1) $2,171 $2,150 $21 $1,986 $185

(1) See Non-GAAP Financial Measure Highlights on pages 4-5 and 15-16 of this press release for additional details and reconciliations to the comparable amounts under GAAP.

(2) See pages 6-7 for additional information on FHFA's Conservatorship Capital Framework (CCF) and (3) pages 8-9 for calculations. 
Freddie Mac Second Quarter 2018 Financial Results

July 31, 2018

Page 2

McLean, VA — Freddie Mac (OTCQB: FMCC) today reported net income of $2.5 billion for the second quarter of 

2018, compared to net income of $2.9 billion for the first quarter of 2018. The company also reported 

comprehensive income of $2.4 billion for the second quarter of 2018, compared to comprehensive income of $2.2 

billion for the first quarter of 2018.

Summary Condensed Consolidated Statements of Comprehensive Income

(Dollars in millions) 2Q 2018 1Q 2018 Change 2Q 2017 Change

Net interest income $3,003 $3,018 $(15) $3,379 $(376)

Benefit (provision) for credit losses 60 (63) 123 422 (362)

Derivative gains (losses) 416 1,830 (1,414) (1,096) 1,512

 Other non-interest income (loss)(1) 809 (1) 810 802 7

Total non-interest income (loss) 1,225 1,829 (604) (294) 1,519

Administrative expense (558) (520) (38) (513) (45)

 Other non-interest expense (585) (590) 5 (493) (92)

Total non-interest expense (1,143) (1,110) (33) (1,006) (137)

Income (loss) before income tax (expense) benefit 3,145 3,674 (529) 2,501 644

Income tax (expense) benefit (642) (748) 106 (837) 195

Net income (loss) $2,503 $2,926 $(423) $1,664 $839

Total other comprehensive income (loss), net of taxes

and reclassification adjustments (68) (776) 708 322 (390)

Comprehensive income (loss) $2,435 $2,150 $285 $1,986 $449

Guarantee fee income(1) $200 $194 $6 $158 $42

(1) Guarantee fee income on a GAAP basis is primarily from the company’s multifamily business and is included in Other income (loss) on Freddie Mac’s condensed 

consolidated statements of comprehensive income.

Financial Results Discussion

Freddie Mac’s second quarter 2018 comprehensive income increased $285 million from the first quarter of 2018. 

Second quarter 2018 results reflected: 

• Continued strong earnings from both the single-family and multifamily businesses driven by higher 

guarantee fee income and a small benefit for credit losses. In addition, despite the mandated reduction in 

the investments portfolio, earnings have remained relatively stable.

• Gain of $264 million, after-tax, from a final judgment against Nomura Holding America, Inc. in litigation 

involving certain non-agency mortgage-related securities. 

• Modest market-related impacts combined with gains from legacy asset dispositions were $0.2 billion, 

after-tax. The company experienced a gain of $0.1 billion from market spread impacts and a gain of $0.2 

billion from legacy asset dispositions, partially offset by a $0.1 billion loss from net interest rate impacts(1), 

all after-tax. 

The small loss from net interest rate impacts in the second quarter of 2018 also reflected the effect of 

the company's implementation of fair value hedge accounting in the first quarter of 2017, which 

significantly reduced the company's GAAP earnings sensitivity to changes in interest rates. 

(1) Net of hedge accounting amortization.
Freddie Mac Second Quarter 2018 Financial Results

July 31, 2018

Page 3

Selected Financial Measures

 

• Net interest income was substantially unchanged from the prior quarter. 

 

(1) Guarantee fee income on a GAAP basis is primarily from the company’s multifamily business and is included in Other income (loss) on Freddie Mac’s 

condensed consolidated statements of comprehensive income.

• Guarantee fee income, primarily from the company’s multifamily business, increased from the prior quarter 

primarily driven by a higher multifamily guarantee portfolio balance due to issuances of K Certificates and 

SB Certificates.

 

• The small provision for credit losses in the first quarter of 2018 changed to a small benefit for credit losses 

in the second quarter of 2018 primarily driven by improvements in estimated loss severity.
Freddie Mac Second Quarter 2018 Financial Results

July 31, 2018

Page 4

Non-GAAP Financial Measure Highlights

In addition to analyzing the company’s results on a GAAP basis, management reviews net interest income and 

guarantee fee income on an “adjusted”, or non-GAAP, basis. These adjusted financial measures are calculated by 

reclassifying certain credit guarantee-related activities and investment-related activities between various line items 

on the company’s GAAP condensed consolidated statements of comprehensive income. Management believes 

these non-GAAP financial measures are useful because they more clearly reflect the company’s sources of 

revenue.

• The company’s GAAP net interest income includes the spread earned on its investments activities plus the 

guarantee fees earned by its single-family business. GAAP guarantee fees are primarily those generated by 

its multifamily business.

Adjusted net interest income is the net spread earned on the company’s investments activities, 

including the cost of funds associated with using derivatives.

Adjusted guarantee fee income consists of the revenues from guarantee fees from both the singlefamily and multifamily businesses, net of the 10 basis point guarantee fee remitted to Treasury as part 

of the Temporary Payroll Tax Cut Continuation Act of 2011. 

The company also presents a non-GAAP financial measure for comprehensive income calculated by adjusting 

GAAP comprehensive income for certain significant items. This non-GAAP financial measure is calculated by 

excluding from the company’s GAAP comprehensive income significant items that are not indicative of its on-going 

operations. Management believes that this non-GAAP financial measure is useful because it allows users to better 

understand the drivers of the company's on-going financial results. 

• The company excluded a final litigation judgment and the related tax effect from GAAP comprehensive 

income in the second quarter of 2018 as it related to the recovery of losses on legacy securities in which 

the company no longer invests.

The graphs that follow show the non-GAAP financial measures for adjusted net interest income and adjusted 

guarantee fee income.

(1) Non-GAAP financial measure. For reconciliations to the comparable amounts under GAAP, see pages 15-16 of this press release.

Note: Amounts may not add due to rounding.
Freddie Mac Second Quarter 2018 Financial Results

July 31, 2018

Page 5

• Adjusted net interest income was substantially unchanged from the prior quarter.

• The mortgage-related investments portfolio declined $5 billion, or 2 percent, from the prior quarter, ending 

the second quarter of 2018 at $236 billion, below the 2018 year-end Purchase Agreement cap of $250 

billion.

The company remained focused on reducing the balance of less liquid assets in this portfolio. The 

balance of less liquid assets declined $6 billion, or 7 percent, from the prior quarter to $77 billion at 

June 30, 2018 due primarily to sales of single-family legacy assets. 

Less liquid assets include single-family reperforming loans, single-family seriously delinquent 

loans, multifamily unsecuritized mortgage loans not in the securitization pipeline, and mortgagerelated securities not guaranteed by a GSE or the U.S. government.

The balances of liquid assets and securitization pipeline assets at June 30, 2018 were $130 billion and 

$29 billion, respectively, together representing approximately 67 percent of the mortgage-related 

investments portfolio.

 

(1) Non-GAAP financial measure. For reconciliations to the comparable amounts under GAAP, see pages 15-16 of this press release.

Note: Amounts may not add due to rounding.

• Adjusted guarantee fee income increased from the prior quarter primarily driven by higher amortization of 

single-family upfront fees resulting from an increase in loan prepayments. 

Changes in the rates of amortization of single-family upfront fees into income are driven by fluctuating 

levels of loan prepayments, which primarily reflect changes in the level of interest rates.

Adjusted single-family guarantee fee income is expected to increase over the long-term as guarantee 

fees on new single-family business are generally higher than the fees received on older vintages that 

continue to run off.

• The total guarantee portfolio grew $26 billion, or 1 percent, from the prior quarter and $117 billion, or 6 

percent, from the prior year.
Freddie Mac Second Quarter 2018 Financial Results

July 31, 2018

Page 6

Return on Modeled Conservatorship Capital Required

In May 2017, FHFA, as Conservator, issued guidance to Freddie Mac to evaluate and manage its financial risk and 

to make economic business decisions, while in conservatorship, utilizing a newly-developed Conservatorship 

Capital Framework (CCF), an economic capital system with detailed formulae provided by FHFA. The CCF also 

provides the foundation for the risk-based component of the proposed Enterprise Capital Rule published by FHFA 

in the Federal Register in July 2018. The CCF assesses capital required under a severe stress event and includes 

credit, market, counterparty and operational risks, as well as a “going concern” buffer. This severe stress event is 

generally consistent with the 2016 Dodd-Frank Act Stress Test “severely adverse” scenario, which was publicly 

reported on August 7, 2017.

The CCF is used to establish the modeled capital required to evaluate business decisions and ensure the company 

makes such decisions prudently when pricing transactions and managing its businesses. This risk-versus-return 

framework focuses on the profits earned versus an estimated cost of equity capital required to support the risk 

assumed to generate those profits. Management relies upon this framework in its decision-making.

Under the Purchase Agreement, the company is not able to permanently retain capital in excess of the $3.0 billion 

Capital Reserve Amount. As a result, it does not have capital sufficient to support its aggregate risk-taking 

activities. Instead, it relies upon the Purchase Agreement to maintain market confidence. 

The existing regulatory capital requirements have been suspended by FHFA during conservatorship. Consequently, 

the company refers to the capital required by the CCF for analysis of transactions and businesses as “modeled 

conservatorship capital required” or simply "CCF capital required." 

The table below provides the return on CCF capital required, calculated as (1) annualized comprehensive income 

for the period divided by (2) average CCF capital required during the period. The company calculates the return 

using both (1) GAAP comprehensive income and (2) comprehensive income excluding significant items(2).

All modeled conservatorship capital required figures presented below are based on the CCF as of June 30, 2018. 

The CCF has been and may be further revised by FHFA from time to time, and may be revised specifically in 

connection with FHFA's consideration and adoption of a final Enterprise Capital Rule, which can result in changes, 

possibly material, in the company's modeled conservatorship capital required. For example, the proposed 

Enterprise Capital Rule includes capital for deferred tax assets, which is not included in the CCF currently, but 

which is already scheduled to be included beginning in 2019.

The return on CCF capital required shown in the table below is not based on the company's actual equity capital 

and does not reflect actual returns on equity capital. 

(Dollars in billions) 2Q 2018 1Q 2018 Change 2Q 2017 Change

GAAP comprehensive income $2.4 $2.2 $0.2 $2.0 $0.4

Significant items:

Non-agency mortgage-related securities judgment(1) (0.3) — (0.3) — (0.3)

Tax effect related to judgment(1) 0.1 — 0.1 — 0.1

Total significant items (0.2) — (0.2) — (0.2)

Comprehensive income, excluding significant items(2) $2.2 $2.2 $0.0 $2.0 $0.2

CCF capital required (average) $53.1 $55.3 $(2.2) $61.6 $(8.5)

Return on CCF capital required, based on GAAP

comprehensive income 18.3% 15.5% 12.9%

Return on CCF capital required, based on comprehensive 

income, excluding significant items(2) 16.4% 15.5% 12.9%

(1) 2Q 2018 GAAP comprehensive income included a benefit of $334 million (pre-tax) from a final judgment against Nomura Holding America, Inc. in litigation 

involving certain of the company's non-agency mortgage-related securities. The tax effect related to this judgment was ($70) million.

(2) See Non-GAAP Financial Measure Highlights on pages 4-5 and 15-16 of this press release for additional details and reconciliations to the comparable amounts 

under GAAP.

Note: Amounts may not add due to rounding.

The company's returns on CCF capital required increased over the last several quarters due to its decreasing level 

of CCF capital required, resulting from home price improvements, the efficient disposition of legacy assets and the 

increasing credit risk transfer activity in both the Single-family and Multifamily businesses. 
Freddie Mac Second Quarter 2018 Financial Results

July 31, 2018

Page 7

The company's three business segments have different capital requirements, returns, and profitability. The return 

on CCF capital required for the Single-family Guarantee business, which has FHFA-prescribed guidance on 

guarantee fee levels, is generally lower than the company's overall return, while the returns in the Multifamily and 

Capital Markets businesses are generally higher.

The company finds the returns calculated above, as well as the returns calculated on specific transactions and 

individual business lines, to be a reasonable measure of risk-versus-return to support its decision-making while the 

company remains in conservatorship. These returns may not be indicative of the returns that would be generated if 

the company were to exit conservatorship, especially as the terms and timing of any such exit are not currently 

known and will depend upon future actions by the U.S. government. The company's belief, should it leave 

conservatorship, is that returns at that time would most likely be below the levels calculated above, assuming the 

same portfolio of risk assets, as the company expects that it would hold capital post-conservatorship above the 

minimum required regulatory capital. It is also likely that the company would be required to pay fees for federal 

government support, thereby reducing its total comprehensive income.

The proposed Enterprise Capital Rule published by FHFA includes a leverage ratio capital requirement. FHFA 

proposes two alternatives for a leverage ratio. Both options would currently produce a capital requirement below 

that produced by the CCF risk-based approach. 

The proposed capital requirements would be suspended after adoption of a final rule while the Enterprises remain 

in conservatorship. 

Segment Financial Results and Business Highlights

Freddie Mac’s operations consist of three reportable segments, which are based on the types of business activities 

they perform – Single-family Guarantee, Multifamily and Capital Markets. The company presents Segment 

Earnings for each reportable segment by reclassifying certain credit guarantee-related activities and investmentrelated activities between various line items on its GAAP condensed consolidated statements of comprehensive 

income and allocating certain revenues and expenses, including funding costs and administrative expenses, to its 

three reportable segments. For more information about Segment Earnings, see Note 13 to the condensed 

consolidated financial statements included in the company’s Quarterly Report on Form 10-Q for the quarter ended 

June 30, 2018 and page 16 of this press release.

Single-family Guarantee Segment

Providing liquidity to the market while transforming U.S. housing finance

Financial Results (1)

(Dollars in millions) 2Q 2018 1Q 2018 Change 2Q 2017 Change

Guarantee fee income $1,571 $1,513 $58 $1,506 $65

Benefit (provision) for credit losses 103 28 75 12 91

Other non-interest income (loss) 119 94 25 359 (240)

Administrative expense (363) (336) (27) (332) (31)

REO operations expense (20) (39) 19 (41) 21

Other non-interest expense (400) (379) (21) (335) (65)

Segment earnings before income tax expense 1,010 881 129 1,169 (159)

Income tax expense (207) (179) (28) (391) 184

Segment earnings, net of taxes 803 702 101 778 25

Total other comprehensive income (loss), net of tax (2) (4) 2 — (2)

Total comprehensive income $801 $698 $103 $778 $23

(1) The financial performance of the company’s Single-family Guarantee segment is measured based on its contribution to GAAP net income (loss).

• Segment earnings increased from the prior quarter primarily driven by higher benefit from single-family 

legacy asset transactions.

Business Highlights

• New business activity was $84 billion for the second quarter of 2018, an increase of $18 billion, or 27 

percent, from the prior quarter. 
Freddie Mac Second Quarter 2018 Financial Results

July 31, 2018

Page 8

Home purchase volume increased to $58 billion while refinance volume decreased to $26 billion. 

• Core loan portfolio (after 2008), which excludes HARP and other relief refinance loans, continued to grow 

and was 80 percent of the single-family credit guarantee portfolio at June 30, 2018.

• Single-family credit guarantee portfolio increased from the prior quarter to $1,855 billion at June 30, 2018.

• Average guarantee fees charged on new acquisitions were 41 basis points (net of the legislated 10 basis 

point guarantee fee remitted to Treasury as part of the Temporary Payroll Tax Cut Continuation Act of 2011) 

for the second quarter of 2018, up from 40 basis points in the prior quarter.

Average guarantee fees on the single-family credit guarantee portfolio were 34 basis points, up from 

33 basis points in the prior quarter, primarily due to higher amortization of upfront fees driven by an 

increase in loan prepayments during the second quarter of 2018.

• As of June 30, 2018, the company had cumulatively transferred a portion of credit risk on more than $1 

trillion of single-family mortgages, based upon the UPB at issuance of the credit risk transfer transactions.

For originations in the twelve months ended June 30, 2017, CCF capital required for credit riskwas 

reduced approximately 60 percent(1) by credit risk transfer transactions; the company plans similar risk 

reduction transactions for this quarter's originations.

• Provided funding for more than 362,000 single-family homes, approximately 121,000 of which were 

refinance loans, in the second quarter of 2018.

(1) The reduction in the amount of CCF capital required for credit risk on new originations is calculated as modeled conservatorship credit capital released 

from the underlying single-family credit risk transfer transaction reference pool divided by total modeled conservatorship credit capital on new 

originations at the time of purchase.

Multifamily Segment

Leading through innovation

Financial Results (1)

(Dollars in millions) 2Q 2018 1Q 2018 Change 2Q 2017 Change

Net interest income $293 $271 $22 $292 $1

Guarantee fee income 204 195 9 162 42

Benefit (provision) for credit losses 2 16 (14) 6 (4)

Gains (losses) on loans and other non-interest income 75 (430) 505 412 (337)

Derivative gains (losses) 224 655 (431) (180) 404

Administrative expense (106) (100) (6) (95) (11)

Other non-interest expense (4) (14) 10 (12) 8

Segment earnings before income tax expense 688 593 95 585 103

Income tax expense (140) (121) (19) (196) 56

Segment earnings, net of taxes 548 472 76 389 159

Total other comprehensive income (loss), net of tax (24) (68) 44 73 (97)

Total comprehensive income (loss) $524 $404 $120 $462 $62

(1) The financial performance of the company’s Multifamily segment is measured based on its contribution to GAAP comprehensive income (loss).

• Comprehensive income increased from the prior quarter primarily driven by higher fair value gains on heldfor-sale loans and commitments.

Derivative gains (losses) for the Multifamily segment are largely offset by interest rate-related fair value 

changes on the loans and investment securities being economically hedged. As a result, there is 

minimal net impact on total comprehensive income for the Multifamily segment from interest raterelated derivatives.

Business Highlights

• New purchase volume was nearly $16 billion for the second quarter of 2018, an increase of 22 percent

from the prior quarter, while outstanding purchase commitments increased 19 percent to $21 billion, 

primarily reflecting a strong pipeline of expected future fundings.
Freddie Mac Second Quarter 2018 Financial Results

July 31, 2018

Page 9

Capped multifamily new business activity was $5.1 billion for the second quarter of 2018 and $11.3 

billion year-to-date, while uncapped new business activity was $10.8 billion for the second quarter of 

2018 and $17.6 billion year-to-date. 

The 2018 FHFA Scorecard goal is to maintain the dollar volume of annual capped multifamily new 

business activity at or below a production cap of $35 billion.

• Multifamily guarantee portfolio increased from the prior quarter to $220 billion at June 30, 2018 due to 

ongoing risk transfer securitizations. 

• As of June 30, 2018, the company had cumulatively transferred a large majority of credit risk on the 

multifamily guarantee portfolio. 

For originations in the twelve months ended June 30, 2017, CCF capital required for credit riskwas 

reduced approximately 90 percent(1) by credit risk transfer transactions; the company plans similar risk 

reduction transactions for this quarter's originations.

• The company executed $14 billion in UPB of credit risk transfer transactions, primarily via K Certificates 

and SB Certificates, during the second quarter of 2018, and $279 billion in UPB since 2009.

In addition to transferring a large majority of the expected and stress credit risk, nearly all of the 

multifamily credit risk transfer transactions also shifted certain non-credit risks associated with the 

underlying assets, such as interest-rate risk and liquidity risk, away from Freddie Mac to third-party 

investors. 

• Provided financing for approximately 191,000 rental units in the second quarter of 2018.

87 percent of the eligible units financed in the second quarter of 2018 were affordable to families 

earning at or below area median incomes.

(1) The reduction in the amount of CCF capital required for credit risk on new originations is calculated as modeled conservatorship credit capital 

released from credit risk transfer transactions (primarily through K Certificates and SB Certificates) divided by total modeled conservatorship credit 

capital on new originations at the time of purchase.

Capital Markets Segment

Enhancing the liquidity of the company’s securities, reducing less liquid assets and funding the company's 

business activities

Financial Results (1)

(Dollars in millions) 2Q 2018 1Q 2018 Change 2Q 2017 Change

Net interest income $862 $817 $45 $875 $(13)

Net impairment of available-for-sale securities

recognized in earnings 26 111 (85) 71 (45)

Derivative gains (losses) 309 1,302 (993) (485) 794

Gains (losses) on trading securities (232) (471) 239 (46) (186)

Other non-interest income 571 525 46 418 153

Administrative expense (89) (84) (5) (86) (3)

Segment earnings before income tax expense 1,447 2,200 (753) 747 700

Income tax expense (295) (448) 153 (250) (45)

Segment earnings, net of taxes 1,152 1,752 (600) 497 655

Total other comprehensive income (loss), net of tax (42) (704) 662 249 (291)

Total comprehensive income (loss) $1,110 $1,048 $62 $746 $364

(1) The financial performance of the company’s Capital Markets segment is measured based on its contribution to GAAP comprehensive income (loss).

• Comprehensive income increased from the prior quarter primarily driven by a $334 million, pre-tax, gain 

from the Nomura Holding America, Inc. judgment involving certain non-agency mortgage-related 

securities, partially offset by lower spread gains on mortgage-related securities.
Freddie Mac Second Quarter 2018 Financial Results

July 31, 2018

Page 10

Business Highlights

• Continued to responsibly reduce the balance of the mortgage-related investments portfolio with a focus on 

reducing less liquid assets. 

Less liquid assets were $51 billion at June 30, 2018, down $2 billion, or 3 percent, from the prior 

quarter, due primarily to sales of $2.1 billion of single-family legacy assets and ongoing portfolio 

liquidations.

• Continued to maintain a presence in the agency mortgage-related securities market to strategically 

support the guarantee business.

Liquid assets held by the Capital Markets segment were 66 percent of the portfolio, or $124 billion, at 

June 30, 2018, relatively unchanged from 66 percent of the portfolio, or $126 billion, at March 31, 

2018.

Housing Market Support

Freddie Mac supports the U.S. housing market by executing its charter mission to ensure credit availability for new 

and refinanced mortgages as well as rental housing while also helping struggling homeowners avoid foreclosure.

Preventing Foreclosures – Freddie Mac continued to help struggling borrowers retain their homes or otherwise 

avoid foreclosure, completing approximately 51,000 single-family loan workouts in the six months ended June 30, 

2018. 

Mortgage Funding – Freddie Mac provided approximately $183 billion in liquidity to the market in the six months 

ended June 30, 2018, funding: 

• More than 644,000 single-family homes, approximately 245,000 of which were refinance loans; and

• Approximately 342,000 multifamily rental units.

(1) As of June 30.

Note: Amounts may not add due to rounding.
Freddie Mac Second Quarter 2018 Financial Results

July 31, 2018

Page 11

About Freddie Mac’s Conservatorship

Since September 2008, Freddie Mac has been operating under conservatorship with FHFA as Conservator. The 

support provided by Treasury pursuant to the Purchase Agreement enables the company to maintain access to the 

debt markets and have adequate liquidity to conduct its normal business operations.

(1) Excludes the initial $1 billion liquidation preference of senior preferred stock issued to Treasury in September 2008 as consideration for Treasury’s funding 

commitment and the $3 billion increase in the aggregate liquidation preference of the senior preferred stock pursuant to the December 21, 2017 Letter 

Agreement. The company received no cash proceeds as a result of issuing the initial $1 billion liquidation preference of senior preferred stock or the $3.0 

billion increase on December 31, 2017.

(2) As of June 30, 2018.

Note: Amounts may not add due to rounding.

• $1.6 billion dividend requirement to the U.S. Treasury in September 2018 based on the company's Net 

Worth Amount at June 30, 2018 of $4.6 billion less the applicable Capital Reserve Amount.

The applicable Capital Reserve Amount is $3.0 billion from January 1, 2018 and thereafter, pursuant to 

the December 21, 2017 Letter Agreement.

• The amount of funding available to Freddie Mac under the Purchase Agreement was $140.2 billion at June 

30, 2018.

• Through June 30, 2018, aggregate cash dividends paid to Treasury were $40.8 billion more than 

cumulative cash draws received from Treasury.

The payment of dividends does not reduce the outstanding liquidation preference under the Purchase 

Agreement.

• The aggregate liquidation preference of the senior preferred stock was $75.6 billion at June 30, 2018.
Freddie Mac Second Quarter 2018 Financial Results

July 31, 2018

Page 12

Additional Information

For more information, including information related to Freddie Mac’s financial results, conservatorship and related 

matters, see the company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2018 and the 

company’s Financial Results Supplement. These documents are available on the Investor Relations page of the 

company’s website at www.FreddieMac.com/investors.

Additional information about Freddie Mac and its business is also set forth in the company’s filings with the SEC, 

which are available on the Investor Relations page of the company’s website at www.FreddieMac.com/investors 

and the SEC’s website at www.sec.gov. Freddie Mac encourages all investors and interested members of the 

public to review these materials for a more complete understanding of the company’s financial results and related 

disclosures.

Webcast Announcement

Management will host a conference call at 9 a.m. Eastern Time on July 31, 2018 to discuss the company’s results 

with the media. The conference call will be concurrently webcast. To access the live audio webcast, use the 

following link: https://edge.media-server.com/m6/p/cm4wk8oe. The replay will be available on the company’s 

website at www.FreddieMac.com/investors for approximately 30 days. All materials related to the call will be 

available on the Investor Relations page of the company’s website at www.FreddieMac.com/investors.

Media Contact: Christopher Spina (703) 388-7031 Investor Contact: Laurie Garthune (571) 382-4732 

* * * *

This press release contains forward-looking statements, which may include statements pertaining to the 

conservatorship, the company’s current expectations and objectives for its Single-family Guarantee, Multifamily 

and Capital Markets segments, its efforts to assist the housing market, liquidity and capital management, 

economic and market conditions and trends, market share, the effect of legislative and regulatory developments 

and new accounting guidance, credit quality of loans the company owns or guarantees, the costs and benefits of 

the company’s credit risk transfer transactions, and results of operations and financial condition on a GAAP, 

Segment Earnings, non-GAAP and fair value basis. Forward-looking statements involve known and unknown risks 

and uncertainties, some of which are beyond the company’s control. Management’s expectations for the 

company’s future necessarily involve a number of assumptions, judgments and estimates, and various factors, 

including changes in market conditions, liquidity, mortgage spreads, credit outlook, actions by the U.S. 

government (including FHFA, Treasury and Congress), and the impacts of legislation or regulations and new or 

amended accounting guidance, could cause actual results to differ materially from these expectations. These 

assumptions, judgments, estimates and factors are discussed in the company’s Annual Report on Form 10-K for 

the year ended December 31, 2017, Quarterly Reports on Form 10-Q for the quarters ended March 31, 2018 and 

June 30, 2018 and Current Reports on Form 8-K, which are available on the Investor Relations page of the 

company’s website at www.FreddieMac.com/investors and the SEC’s website at www.sec.gov. The company 

undertakes no obligation to update forward-looking statements it makes to reflect events or circumstances 

occurring after the date of this press release.

Freddie Mac makes home possible for millions of families and individuals by providing mortgage capital to lenders. 

Since its creation by Congress in 1970, the company has made housing more accessible and affordable for 

homebuyers and renters in communities nationwide. The company is building a better housing finance system for 

homebuyers, renters, lenders and taxpayers. Learn more at FreddieMac.com, Twitter @FreddieMac and Freddie 

Mac’s blog FreddieMac.com/blog.
Freddie Mac Second Quarter 2018 Financial Results

July 31, 2018

Page 13

FREDDIE MAC

Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)

(Dollars in millions, except share-related amounts) 2Q 2018 1Q 2018 2Q 2017

Interest income

Mortgage loans $16,344 $15,951 $15,848

Investments in securities 730 810 902

Other 228 214 150

Total interest income 17,302 16,975 16,900

Interest expense (14,299) (13,957) (13,521)

Net interest income 3,003 3,018 3,379

Benefit (provision) for credit losses 60 (63) 422

Net interest income after benefit (provision) for credit losses 3,063 2,955 3,801

Non-interest income (loss)

Gains (losses) on extinguishment of debt 147 110 50

Derivative gains (losses) 416 1,830 (1,096)

 Net impairment of available-for-sale securities recognized in earnings (1) — (3)

Other gains (losses) on investment securities recognized in earnings (348) (232) 61

Other income (loss) 1,011 121 694

Non-interest income (loss) 1,225 1,829 (294)

Non-interest expense

Salaries and employee benefits (303) (286) (266)

Professional services (113) (102) (118)

Other administrative expense (142) (132) (129)

Total administrative expense (558) (520) (513)

Real estate owned operations expense (15) (34) (37)

Temporary Payroll Tax Cut Continuation Act of 2011 expense (366) (359) (330)

Other expense (204) (197) (126)

Non-interest expense (1,143) (1,110) (1,006)

Income (loss) before income tax (expense) benefit 3,145 3,674 2,501

Income tax (expense) benefit (642) (748) (837)

Net income (loss) 2,503 2,926 1,664

Other comprehensive income (loss), net of taxes and reclassification adjustments:

 Changes in unrealized gains (losses) related to available-for-sale securities (96) (800) 295

Changes in unrealized gains (losses) related to cash flow hedge relationships 32 30 27

Changes in defined benefit plans (4) (6) —

Total other comprehensive income (loss), net of taxes and reclassification

adjustments (68) (776) 322

Comprehensive income (loss) $2,435 $2,150 $1,986

Net income (loss) $2,503 $2,926 $1,664

Undistributed net worth sweep and senior preferred stock dividends (1,585) — (1,986)

Net income (loss) attributable to common stockholders $918 $2,926 $(322)

Net income (loss) per common share — basic and diluted $0.28 $0.90 $(0.10)

Weighted average common shares outstanding (in millions) — basic and diluted 3,234 3,234 3,234
Freddie Mac Second Quarter 2018 Financial Results

July 31, 2018

Page 14

FREDDIE MAC

Condensed Consolidated Balance Sheets (Unaudited)

(Dollars in millions, except share-related amounts) June 30,

2018

December 31,

2017

Assets

Cash and cash equivalents (includes $536 and $2,963 of restricted cash and cash equivalents) $6,752 $9,811

Securities purchased under agreements to resell 41,769 55,903

Investments in securities, at fair value 77,710 84,318

Mortgage loans held-for-sale (includes $16,621 and $20,054 at fair value) 26,277 34,763

Mortgage loans held-for-investment (net of allowance for loan losses of $8,397 and $8,966) 1,858,574 1,836,454

Accrued interest receivable 6,470 6,355

Derivative assets, net 391 375

Deferred tax assets, net 8,299 8,107

Other assets (includes $3,598 and $3,353 at fair value) 15,490 13,690

Total assets $2,041,732 $2,049,776

Liabilities and equity

Liabilities

Accrued interest payable $6,377 $6,221

Debt, net (includes $5,423 and $5,799 at fair value) 2,021,162 2,034,630

Derivative liabilities, net 409 269

Other liabilities 9,199 8,968

Total liabilities 2,037,147 2,050,088

Commitments and contingencies

Equity

Senior preferred stock (redemption value of $75,648 and $75,336) 72,648 72,336

Preferred stock, at redemption value 14,109 14,109

Common stock, $0.00 par value, 4,000,000,000 shares authorized, 725,863,886 shares

issued and 650,058,775 shares and 650,054,731 shares outstanding — —

Additional paid-in capital — —

Retained earnings (accumulated deficit) (77,922) (83,261)

AOCI, net of taxes, related to:

Available-for-sale securities (includes $350 and $593, related to net unrealized gains on 

securities for which other-than-temporary impairment has been recognized in earnings) (91) 662

Cash flow hedge relationships (367) (356)

Defined benefit plans 92 83

Total AOCI, net of taxes (366) 389

Treasury stock, at cost, 75,805,111 shares and 75,809,155 shares (3,884) (3,885)

Total equity 4,585 (312)

Total liabilities and equity $2,041,732 $2,049,776

The table below presents the carrying value and classification of the assets and liabilities of consolidated variable interest entities (VIEs) on the

company's condensed consolidated balance sheets.

(Dollars in millions) June 30,

2018

December 31,

2017

Consolidated Balance Sheet Line Item

Assets:

Mortgage loans held-for-investment $1,795,534 $1,774,286

All other assets 25,044 25,753

Total assets of consolidated VIEs $1,820,578 $1,800,039

Liabilities:

Debt, net $1,746,298 $1,720,996

All other liabilities 5,124 5,030

Total liabilities of consolidated VIEs $1,751,422 $1,726,026
Freddie Mac Second Quarter 2018 Financial Results

July 31, 2018

Page 15

FREDDIE MAC

Non-GAAP Reconciliations

Reconciliation of GAAP Net Interest Income to Adjusted Net Interest Income (pre-tax)

(Dollars in millions) 2Q 2017 3Q 2017 4Q 2017 1Q 2018 2Q 2018

GAAP net interest income $3,379 $3,489 $3,501 $3,018 $3,003

Reclassifications:

Guarantee fee income reclassified to adjusted guarantee fee 

income (1)(2)

(1,840) (1,921) (1,946) (1,873) (1,941)

Accrual of periodic cash settlements reclassified from derivative 

gain (loss) (3)

(429) (398) (296) (145) (43)

Hedge accounting impact (4) 42 40 (132) 373 214

Other reclassifications (5) 15 (64) (53) (285) (78)

Total reclassifications (2,212) (2,343) (2,427) (1,930) (1,848)

Adjusted net interest income $1,167 $1,146 $1,074 $1,088 $1,155

Reconciliation of GAAP Guarantee Fee Income* to Adjusted Guarantee Fee Income (pre-tax)

(Dollars in millions) 2Q 2017 3Q 2017 4Q 2017 1Q 2018 2Q 2018

GAAP guarantee fee income* $158 $169 $186 $194 $200

Reclassifications:

Guarantee fee income reclassified from net interest income (1)(2) 1,840 1,921 1,946 1,873 1,941

Temporary Payroll Tax Cut Continuation Act of 2011 expense 

reclassified from other non-interest expense (6)

(330) (339) (350) (359) (366)

Total reclassifications 1,510 1,582 1,596 1,514 1,575

Adjusted guarantee fee income $1,668 $1,751 $1,782 $1,708 $1,775

Reconciliation of GAAP Comprehensive Income to Comprehensive Income, excluding Significant Items

(Dollars in millions) 2Q 2017 3Q 2017 4Q 2017 1Q 2018 2Q 2018

GAAP comprehensive income $1,986 $4,650 $(3,312) $2,150 $2,435

Exclusions:

Non-agency mortgage-related securities settlements and 

judgments (7) — (4,525) — — (334)

Tax effect related to settlements and judgments — 1,584 — — 70

Write-down of net deferred tax asset (8) — — 5,405 — —

Total exclusions — (2,941) 5,405 — (264)

Comprehensive income, excluding significant items $1,986 $1,709 $2,093 $2,150 $2,171

* Guarantee fee income on a GAAP basis is included in Other income (loss) on Freddie Mac’s condensed consolidated statements of comprehensive income. 

Note: Columns may not add due to rounding. 

For notes on reclassifications, see page 16 of this press release. 
Freddie Mac Second Quarter 2018 Financial Results

July 31, 2018

Page 16

Notes on Significant Reclassifications

(1) Net guarantee fees are reclassified from GAAP net interest income to adjusted guarantee fee income.

(2) Implied guarantee fee income related to unsecuritized loans held in the mortgage investments portfolio is 

reclassified from GAAP net interest income to adjusted guarantee fee income. 

(3) The accrual of periodic cash settlements of derivatives is reclassified from GAAP derivative gains (losses) into 

adjusted net interest income to fully reflect the periodic cost associated with the protection provided by these 

contracts.

(4) Hedge accounting impact consists of removing the effects of hedge accounting including deferred gains and 

losses on closed cash flow hedges related to forecasted debt issuances. 

(5) Other reclassifications primarily relate to items reclassified out of GAAP net interest income, including the 

amortization of premiums and discounts associated with the company’s PCs and the loans underlying those 

PCs, amortization of non-cash premiums on single-family loans in trusts and on consolidated PCs, amortization 

of discounts on loans purchased with deteriorated credit quality that are on accrual status, the accretion of 

other-than-temporary impairments on available-for-sale securities, STACR debt note expense and net float 

income or expense.

(6) The expense related to the Temporary Payroll Tax Cut Continuation Act of 2011 is reclassified from GAAP other 

non-interest expense to adjusted guarantee fee income. As a result of the reclassification, the revenue and 

expense related to the legislated 10 basis point increase are netted within adjusted guarantee fee income.

(7) The third quarter 2017 GAAP results included a benefit of $4.5 billion (pre-tax) from a settlement with the Royal 

Bank of Scotland plc related to non-agency mortgage-related securities. The tax effect related to this settlement 

was $(1.6) billion. The second quarter 2018 GAAP results included a gain of $334 million (pre-tax) from a final 

judgment against Nomura Holding America, Inc. in litigation involving certain non-agency mortgage-related 

securities. The tax effect related to this judgment was $(70) million. 

(8) The Tax Cuts and Jobs Act of 2017 enacted in December 2017 reduced the statutory corporate income tax rate 

from 35% to 21%. Although not effective until January 1, 2018, accounting rules require that the company 

measure its net deferred tax asset using the reduced rate in the period in which the legislation was enacted. 

Therefore, the company reduced its net deferred tax asset by $5.4 billion, with a corresponding charge to 

deferred income tax expense. This resulted in a decrease in both net income and comprehensive income in the 

fourth quarter of 2017.