Federal Home Loan Mortgage came into this Q3 2026 report wearing the label of a low‑priced, high‑risk housing finance stock. Then the new numbers hit and the shares jumped 7% in regular trading to US$4.42. The market clearly reacted fast to an earnings story built on profit, not just book value.
The headline is simple. Freddie Mac booked net income of US$3.2b for the quarter and lifted net worth to almost US$81b. For a business often discussed through the lens of capital shortfalls and regulation, this quarter put raw earning power back at the center of the conversation.
Like the earning power story at Federal Home Loan Mortgage but wary of the complexity around regulation and capital? Consider a broader mix of housing finance and credit stocks with stronger balance sheets and cleaner risk profiles in our list of solid balance sheet and fundamentals stocks (25 results)
Q3 2026 Earnings Summary
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Total Revenue (Q3 2026 vs Q3 2025):US$6,010m vs. US$5,564m (up 8.0%)
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Net Income (Excl. Extra Items, Q3 2026 vs Q3 2025):US$29m profit vs. US$16m loss (moved back into profit)
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Basic EPS (Q3 2026 vs Q3 2025):US$0.008967 vs. a loss of US$0.004947 per share (swing back to positive earnings per share)
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Net Interest Margin (Trailing 12 Months to Q4 2025 vs Prior TTM to Q3 2025):0.63% vs. not disclosed for the earlier period (margin reported only for the latest trailing period)
Freddie Mac grew earnings but still flagged a major capital gap. Ask Charlie what Freddie Mac's capital shortfall means for investors .
Freddie Mac earnings power vs credit quality story
The optimistic view is that Freddie Mac's large, high quality book and mission focus keep earnings resilient even when volumes are choppy.
"High credit quality in the single family book, with a weighted average current loan to value ratio of 53%, an average credit score of 753 and serious delinquencies at 60 basis points, together with broad use of credit enhancements, can help limit future credit losses and support net margins."
Q3 net income of US$3.2b and Single Family net income of US$2.7b arrived alongside serious delinquency of 61 bps and modest net charge offs of US$132m. Provision expense rose, but credit metrics remained tight, so the margin support thesis passed a key test.
Bear case on capital and rate risk under the microscope
The skeptical narrative argues that capital rules and rate sensitivity can blunt the equity story even when Freddie Mac prints solid profits.
"The company shows a regulatory capital shortfall, including a large amount of senior preferred stock that does not count as regulatory capital. Changes in capital requirements or slower capital build could limit balance sheet growth and affect future earnings capacity."
Net worth is almost US$81b, yet required capital is US$162b with a US$98b shortfall once buffers are included and US$73b of Senior Preferred Stock excluded. Higher projected mortgage rates also drove Single Family reserve builds. The quarter showed strong earnings, but the structural capital gap and rate driven credit sensitivity remain firmly in view.
The price and this Narrative do not agree. → Uncover what this Narrative says Federal Home Loan Mortgage is actually worth .
Hunt For Mispriced Earnings Power
Federal Home Loan Mortgage just reminded investors how quickly sentiment can change when one quarter reframes expectations. The real opportunity is finding stocks that could be undervalued before the market reassesses their earnings power.
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Company 1 - 30% below our estimate - builds an AI heavy cloud and productivity ecosystem that turns existing enterprise workflows into recurring software and infrastructure usage.
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Company 2 - 47% below our estimate - feeds rising ad budgets into AI tuned formats and tools that adapt campaigns in real time and monetize new messaging and hardware experiences.
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Company 3 - 31% below our estimate - hardwires the digital economy with chips and software that carry, secure and manage growing AI and cloud data flows for hyperscale customers.
That is three of the list. See all 29 potentially undervalued companies →
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Companies discussed in this article include FMCC .
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