Friday morning, Federal Home Loan Mortgage Corp., generally known as Freddie Mac (FRE), reported a third-quarter net loss that widened significantly from the previous year, hurt by charges and impairments, amid a tumultuous housing environment. Revenues deflected to the negative side due to surge in non-interest losses, and missed analysts' estimates by a wide margin. The huge loss for the quarter resulted in net worth turning negative by $13.8 billion, forcing the beleaguered company to seek emergency funding from the Treasury to restore the balance sheet.
The McLean, Virginia-based company posted net loss of $25.3 billion or $19.44 per share, compared to a net loss of $1.24 billion or $2.07 per share in the third quarter of 2007.
On average, six analysts surveyed by First Call/Thomson Financial expected the company to report loss per share of $0.89. Analysts' estimates typically exclude special items.
Freddie Mac reported negative third-quarter revenues of $9.44 billion, compared to revenues of $878 million in the preceding year quarter. Wall Street analysts had a consensus revenue estimate of $1.44 billion.
The revenue for the quarter turned negative primarily due to accounting of a non-interest loss of $12.11 billion, partially offset by higher net interest income and marginal increase in management and guarantee income.
Among the components of the revenue, net interest income for the quarter was $1.8 billion, up $1.1 billion from $761 million in the year-ago period, driven by lower funding costs and purchases of fixed-rate assets at wider spreads relative to the funding costs.
Other non-interest loss widened to $12.1 billion from $601 million in the previous year. The non-interest losses comprised $9.1 billion of security impairments, a $932 million loss related to the company's trading securities, and mark-to-market losses of $1.3 billion and $1.4 billion, on the company's guarantee asset and derivatives portfolio, respectively.
As a result of the huge loss reported in the third quarter, the net worth, which represents the difference between the assets and liabilities of the company, turned negative by a whopping $13.8 billion. In order to restore the balance sheet, the company stated that it sought the assistance of the Treasury to pump in $13.8 billion by purchasing its preferred stock. A request has been forwarded through the Federal Housing Finance Agency, of FHFA, which has been nominated as the conservator for Freddie Mac and Fannie Mae (FNM), to the Treasury. The company expects to receive funds from the Treasury before the end of this month.
Freddie Mac attributed the sharp deterioration in credit market conditions during the quarter as the primary reason for providing a huge amount towards non-cash charges. Increasing unemployment in the economy, as witnessed by consistent drop in monthly payroll data since the beginning of the calendar year, rising delinquencies for home loans, sharp drop in home prices, curb in spending patterns of people due to lower income, and tightening of market conditions for extending credit to businesses as well as consumers, typically characterize the present economic conditions in the world's largest economy.
The results of the most recent quarter included a non-cash charge of $14.3 billion related to the establishment of a partial valuation allowance against the company's deferred assets, $9.1 billion in security impairments on available-for-sale securities and $6.0 billion in credit-related expenses.
Administrative expenses declined to $308 million from $428 million in the preceding year, due to reduction in short-term performance compensation.
Credit related expenses, consisting of provision for credit losses and REO operations expense rose to $6.0 billion from $1.4 billion in the third quarter of last year. The company said the increase in provision for credit losses reflected continued credit deterioration in its single-family credit guarantee portfolio. Other non-interest expenses increased slightly to $1.5 billion from $1.2 billion in the preceding year.
For the nine-month period, the company reported net loss of $26.27 billion or $30.90 per share, compared to net loss of $642 million or $1.43 per share in the comparable period of last year. Net interest income for the period rose to $4.17 billion from $2.32 billion in the corresponding period of last year. Shares of FRE are currently trading at $0.67, down $0.06, or 8.22%, on a volume of 15.3 million shares.
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May 22, 2026 14:46 ET Minutes of the latest Fed policy session was the highlight of the week along with survey data on the U.S. housing market. In Europe, survey data signaled the trends in the euro area private sector. Further, consumer price inflation data from the U.K. was in focus. In Asia, various economic indicators from China drew attention to the health of the economy.