Federal Home Loan Mortgage Corporation, better known as Freddie Mac, has long been a shadowy figure in the financial world. Since the 2008 housing crisis, its fate, alongside its sibling Fannie Mae, has hung in a state of government-sponsored limbo. While analysts and investors have primarily focused on the common stock, a peculiar trend in Freddie Mac's preferred stock, FMCCG, might just be the whisper we've been waiting for – a signal of potential resurgence.

FMCCG, a floating-rate preferred stock, has been showing signs of life amidst the company's complex financial narrative. The data reveals a market capitalization of roughly $3 billion, a figure that may appear modest compared to the behemoth that Freddie Mac once was, yet it reflects a growing interest in this specific security. While the common stock, burdened by the uncertainty of government control and a potential restructuring, has languished, FMCCG has been quietly attracting attention.

Could this be due to its unique floating-rate structure, providing a hedge against rising interest rates in an increasingly volatile economic environment? Possibly. Or perhaps, it's a reflection of a growing belief that Freddie Mac, despite its current constraints, is poised to regain its footing in the mortgage market.

Looking deeper into the available financial data, a fascinating, and perhaps overlooked, detail emerges: the net interest income. For the current quarter ending March 31, 2024, Freddie Mac reported a net interest income of $4.759 billion. This represents a substantial portion of the total revenue of $5.757 billion for the same period. The consistency of robust net interest income across recent quarters, even as the company navigates a fluctuating economic landscape, suggests a core strength that might be overlooked when considering only the headline figures.

Here's where the hypothesis gets intriguing: could FMCCG's recent performance be a leading indicator of a broader, positive shift for Freddie Mac? Is the market, through its interest in this preferred stock, recognizing the underlying strength of the company's core business, its ability to generate consistent net interest income, and its potential for future growth?

This is not to suggest an imminent return to the pre-crisis glory days. Freddie Mac still operates under considerable constraints. However, the FMCCG whisper suggests that the market is beginning to differentiate between the common stock's political baggage and the underlying potential of Freddie Mac's core business.

Net Interest Income Growth

Freddie Mac's net interest income has been steadily increasing in recent years, demonstrating the resilience of its core business.

Let's delve into some numbers: in the year ending December 31, 2023, Freddie Mac generated $18.542 billion in net interest income, a significant increase from $12.771 billion in 2020. This upward trajectory speaks volumes about the company's continued relevance and ability to generate revenue even within the confines of government conservatorship.

Furthermore, the recent appointment of Dr. Michael Thomas Hutchins as the Interim CEO injects a new wave of leadership and potential strategic direction for the company. Dr. Hutchins' extensive experience in the housing finance industry could be the catalyst needed to navigate Freddie Mac towards a more stable and independent future.

A Symbolic Passing of the Torch?

"Adding a touch of intrigue to this narrative is a little-known fact: Freddie Mac's headquarters is situated at 8200 Jones Branch Drive in McLean, Virginia. This seemingly mundane detail becomes fascinating when one learns that the building was previously occupied by Gannett, the media giant behind USA Today. Could this be a symbolic passing of the torch, from the world of media to the world of finance? Perhaps Freddie Mac is ready to write its own headline-grabbing story, one that reflects a return to strength and stability."

The evidence suggests that FMCCG's performance might be more than just an anomaly. It could be a ghostly whisper, a subtle signal that the market is starting to recognize the inherent value of Freddie Mac, independent of its political complexities. While the future remains uncertain, this preferred stock's performance, coupled with the company's consistent net interest income and new leadership, hints at a potential resurgence, a story that will be fascinating to watch unfold.

Fun Fact

"Freddie Mac and Fannie Mae have nicknames! Freddie Mac is often referred to as "Freddie," while Fannie Mae is known as "Fannie." These nicknames reflect the familiarity and importance of these institutions in the US mortgage market."