Morningstar DBRS Confirms Federal Home Loan Mortgage Corporation's Long-Term Credit Ratings of AAA With Stable Trends

Published: 2026-04-13 04:43:10 ET FMCC

Published on 04/13/2026 at 04:43 am EDT

DBRS, Inc. (Morningstar DBRS) confirmed both the Long-Term Issuer Rating and Long-Term Senior Debt credit rating of Federal Home Loan Mortgage Corporation (Freddie Mac or the Company) at AAA.

The trends on all credit ratings are Stable. The Company's current position under conservatorship and the strong implicit support from the U.S. federal government result in Freddie Mac's final credit ratings being equalized with the Long-Term Local Currency - Issuer Rating of the United States of America (the U.S.), as well as the maintaining of the SA1 Support Assessment.

KEY CREDIT RATING CONSIDERATIONS

Freddie Mac's Long-Term Issuer Rating remains equalized with the sovereign credit rating of the U.S. Despite the lack of an explicit guarantee, the credit ratings are underpinned by the very strong and ongoing systemic support from the U.S. government. Also considered are the Company's well-established position in the market, scale economies, and Morningstar DBRS' view that there are currently no other entities that could readily perform this specific role outside of the two housing government-sponsored enterprises (GSEs). Freddie Mac remains essential to the functioning of the U.S. housing market given the critical function it serves, and its irreplicable market position, access to funding commitments from the U.S. Treasury, and conservatorship status under the Federal Housing Finance Agency (FHFA) are also important considerations. Freddie Mac is of high systemic importance, given its absence from the U.S. housing finance ecosystem would likely result in higher levels of volatility and more severe/disruptive systemic shocks across the broader U.S. economy in times of stress. While speculation continues around the potential privatization of the GSEs, Morningstar DBRS does not view any changes to its status as likely for the length of the credit rating outlook period given the complexities and potential consequences of such an action, especially considering the current macroeconomic environment.

Freddie Mac's position across the global debt capital markets is also an important consideration in the assessment of the Company's essentiality. The debt of the Company is widely held throughout the global financial system, likely incentivizing the U.S. government to help avoid any defaults given the likely repercussions. Morningstar DBRS also considers Freddie Mac's high degree of access to financial support given its existing funding commitment from the U.S. Treasury, which provides the Company with a source of funds should its GAAP net worth turn negative. Although the drawable limit remains ($140.2 billion as of YE2025), continued support from the U.S. government is assumed to be timely should the need arise. Freddie Mac also has strong government oversight given its conservatorship status under the FHFA. The FHFA reconstituted the board of directors (the Board) after becoming Conservator, directing the Board to owe its fiduciary obligations solely to the FHFA (and not to the Company or shareholders).

The Stable trends primarily reflect that of the U.S. sovereign credit rating. Given the size of capital required to meet regulatory capital standards, the complexities of privatization, and the current U.S. housing market that is facing substantial headwinds, Morningstar DBRS foresees Freddie Mac remaining in conservatorship for the length of the credit rating outlook period.

CREDIT RATING DRIVERS

Given the current credit ratings of Freddie Mac are at the highest level in Morningstar DBRS' long-term credit rating scale, there is no potential for a credit ratings upgrade. Conversely, the credit ratings would be downgraded should we lower the Long-Term Local Currency-Issuer Rating of the U.S. Morningstar DBRS would also downgrade the credit ratings of Freddie Mac should we view the support from the U.S. Treasury to be diminished, or the expectation of support to be less timely.

CREDIT RATING RATIONALE

Franchise Building Block Assessment

Freddie Mac has a unique franchise given its federal charter and status as a GSE. The Company was chartered in 1970 by an act of Congress and was established to support a liquid and stable secondary market for U.S. residential and multifamily mortgages. Freddie Mac does not originate or service mortgage loans directly, but rather, aggregates these loans via purchases from other financial institutions and packages them into mortgage-related securities, while guaranteeing their principal and interest payments. As guaranteeing residential mortgages is core to its business activities, the effective pricing and managing of mortgage credit risk is key to the Company's success. Nevertheless, Freddie Mac also requires FHFA approval prior to any new product offerings, resulting in limitations on its current and future business activities.

The Company provided $465 billion in liquidity to the mortgage market in 2025 and guaranteed approximately $3.2 trillion of single-family residential mortgages at YE2025, reflecting a significant share of the market and the scale of its operations. In December 2025, the Company announced Kenny M. Smith as Freddie Mac's new chief executive officer (CEO), replacing Mike Hutchins, who had been serving in the dual role of interim CEO and president since the previous CEO's (Diana Reid) departure in March 2025. Freddie Mac operates across two business segments (single-family and multifamily), with single-family accounting for most of its net revenues (85% in 2025).

Earnings Building Block Assessment

Freddie Mac's earnings power is substantial given the size of its operations. Nonetheless, the Company's earnings can also be volatile given its linkage to the cyclical U.S. housing market and exposure to interest rate movements. Freddie Mac's revenues are predominately generated from its single-family business segment and sourced from the guarantee fees received for managing the credit risk on loans underlying its agency MBS. Indeed, guarantee net interest income accounted for 73% of the Company's total net revenues in 2025. As Freddie Mac does not originate or service the residential mortgages it guarantees, the Company has also been able to maintain a relatively low efficiency ratio.

In 2025, the Company reported net income of $10.7 billion (down 10% year over year (YOY)), driven primarily by lower net revenues and higher provision for credit losses. Net revenues of $23.3 billion (down 3%) were driven by lower non-interest income (down 55%) that was partially offset by higher net interest income (up 8%). Freddie Mac also reported a provision for credit losses of $1.3 billion (compared with provisions of $476 million in 2024), driven by credit reserve builds across both the single family and multifamily book, given changes in forecasted and observed single-family home prices, as well as deteriorating credit quality on certain delinquent multifamily loans.

Risk Building Block Assessment

Freddie Mac is exposed to both national and regional housing downturns given its sizable share of the U.S. housing market. Nonetheless, overall credit quality across its guarantee book remains sound. The Company's serious delinquency rate (SDQ) of 59 basis points (bps) across its single-family portfolio as of YE2025 was unchanged YOY. Separately, although the Company's multifamily portfolio delinquency rate ticked up slightly to 44 bps at YE2025 (compared with 40 bps at YE2024), nonaccruals stood at only 16 bps, and the multifamily book remains well-diversified.

The Company transfers a portion of its single-family credit risk to third parties through mortgage insurance and credit risk transfer transactions, and it uses credit enhancements (both front-end and back-end) across its multifamily credit exposures. Indeed, 61% of its single-family and 89% of its multifamily portfolio balances had some form of credit enhancement at YE2025. Freddie Mac is also exposed to operational risk through several avenues but has maintained sound operational risk oversight and a good track record of identifying and managing these risks.

Funding and Liquidity Building Block Assessment

Freddie Mac is one of the largest debt issuers globally, and its broad and deep funding base is composed of a range of securities tailored to meet the needs of virtually every type of investor. The Company's securities are also deemed exempt securities and receive favorable treatment from a regulatory perspective, further supporting the scale of its debt issuance platform. At YE2025, Freddie Mac had $3.4 trillion in total debt outstanding and a balance sheet that remains highly encumbered given 94% of the debt was composed of securitization debt. The Company's funding is generally well-aligned with its asset base given the agency MBS amortizes with the underlying residential mortgages. The remaining funding is issued as unsecured corporate debt, with maturities that are laddered appropriately. The Company maintains a solid liquidity position underpinned by a well-designed liquidity management framework and contingent liquidity plan. However, in a severely stressed operating environment, the Company is unlikely to meet its sizable liquidity requirements without support from the U.S. Treasury.

Capitalization Building Block Assessment

Freddie Mac has been able to build upon its net worth over the past several years. At YE2025, Freddie Mac's net worth totaled $70.4 billion (on a GAAP basis), compared with $9.1 billion at YE2019. However, the Company's capital levels remain materially below its risk- and leverage-based regulatory requirements. Although the Company's required adherence to the enterprise regulatory capital framework has been waived during conservatorship, Freddie Mac remains significantly undercapitalized, with the Company reporting negative regulatory capital ratios across most tiers of capital.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS

Credit rating actions on the United States of America are likely to have an impact on this credit rating. ESG factors that have a significant or relevant effect on the credit analysis of United States of America are discussed separately at https://dbrs.morningstar.com/issuers/12866. However, there were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.

A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (May 16, 2025) at https://dbrs.morningstar.com/research/454196.

Notes:

All figures are in U.S. dollars unless otherwise noted.

The principal methodology is the Global Methodology for Rating Non-Bank Financial Institutions (September 5, 2025) https://dbrs.morningstar.com/research/462007. In addition, Morningstar DBRS uses the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (May 16, 2025) https://dbrs.morningstar.com/research/454196 in its consideration of ESG factors.

The following methodologies have also been applied:

Global Methodology for Rating Government-Related Entities (February 13, 2026)

https://dbrs.morningstar.com/research/474099

The credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.

The primary sources of information used for these credit ratings include Morningstar, Inc., U.S. Federal Reserve, Federal Housing Finance Agency, and company documents. Morningstar DBRS considers the information available to it for the purpose of providing this credit rating was of satisfactory quality.

The credit ratings were not initiated at the request of the rated entity.

The rated entity or its related entities did not participate in the credit rating process for this credit rating action.

Morningstar DBRS did not have access to the accounts, management, and other relevant internal documents of the rated entity or its related entities in connection with this credit rating action.

These are unsolicited credit ratings.

For more information on Morningstar DBRS' policy regarding the solicitation status of credit ratings, please refer to the Credit Ratings Global Policy, which can be found in the Morningstar DBRS Understanding Ratings section of the website: https://dbrs.morningstar.com/understanding-ratings.

These credit ratings are endorsed by DBRS Ratings Limited for use in the United Kingdom, and by DBRS Ratings GmbH for use in the European Union, respectively. The following additional regulatory disclosures apply to endorsed ratings:

The last credit rating action on this issuer took place on April 16, 2025.

With respect to FCA and ESMA regulations in the United Kingdom and European Union, respectively, these are unsolicited credit rating. The credit ratings were not initiated at the request of the issuer.

With Rated Entity or Related Third-Party Participation: No

With Access to Internal Documents: No

With Access to Management: No

The conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. Morningstar DBRS' trends and credit ratings are monitored.

For further information on Morningstar DBRS historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see: https://registers.esma.europa.eu/cerep-publication. For further information on Morningstar DBRS historical default rates published by the Financial Conduct Authority (FCA) in a central repository, see https://data.fca.org.uk/#/ceres/craStats.

Lead Analyst: Eric Chan, Vice President

Rating Committee Chair: David Laterza, Associate Managing Director

Initial Rating Date: April 18, 2024

For more information on this credit or on this industry, visit https://dbrs.morningstar.com.

DBRS, Inc.

140 Broadway, 43rd Floor

New York, NY 10005 USA

Tel. +1 212 806-3277