Mortgage-Backed Securities (MBS)
Responsible for owning or guaranteeing about half of the $12 trillion U.S. mortgage market during an epic housing bubble collapse, the federal government took over Freddie Mac and Fannie Mae in 2008 to prevent their collapse. Freddie Mac stock had plunged 97% between October 2007 and October 2008. The federal conservatorship has remained since then, with the U.S. Treasury Department holding warrants for 80% of Freddie Mac and Fannie Mae stock.
How to buy Freddie Mac
1. Open your brokerage app: Log in to your brokerage account where you handle your investments.
2. Search for the stock: Enter the ticker or company name into the search bar to bring up the stock's trading page.
3. Decide how many shares to buy: Consider your investment goals and how much of your portfolio you want to allocate to this stock.
4. Select order type: Choose between a market order to buy at the current price or a limit order to specify the maximum price you're willing to pay.
5. Submit your order: Confirm the details and submit your buy order.
6. Review your purchase: Check your portfolio to ensure your order was filled as expected and adjust your investment strategy accordingly.
Should I invest in Freddie Mac?
Before you buy shares of Freddie Mac, you need to consider the pros and cons of investing in the GSE. Here are some reasons you might want to invest in Freddie Mac:
- You think interest rates will soon fall and boost demand for mortgages.
- You believe home prices will also fall, restarting a dormant real estate market.
- You think Freddie Mac will be released from its conservatorship soon.
- You believe Freddie Mac stock is severely undervalued.
- You don't need dividend income.
- You think smaller financial institutions, such as credit unions, will make a larger percentage of mortgage loans as the housing market recovers.
- You believe Freddie Mac has a sound, long-term strategy.
- You think GSEs are unlikely to fall back into the underwriting traps that contributed to the 2007-09 financial crisis.
You may want to hold off on a Freddie Mac purchase if:
- You don't see interest rates falling any time soon.
- You think home prices will remain elevated for a long time, dampening mortgage activity.
- You doubt Freddie Mac will be released from conservatorship any time soon.
- You're unimpressed with Freddie Mac's stock performance over the last decade.
- You rely on dividend income.
- You can't see smaller financial institutions competing with behemoths for a share of the mortgage market.
- You're not sure what Freddie Mac does or why it exists.
- You believe GSEs didn't learn their lesson from the 2007-09 financial crisis.
Is Freddie Mac profitable?
Freddie Mac reported that it was profitable during the first quarter of 2025 -- which may be surprising, given the state of the housing market. It recorded $2.8 billion in first-quarter net income on revenue of $5.9 billion, a fairly steady amount over the previous year.
Despite high interest rates and an affordable housing crisis, Freddie Mac also increased the year-over-year size of its mortgage portfolio by 5%, rising to $3.6 trillion. Its delinquency rate remained steady at roughly 1%.
Although Freddie Mac stock prices won't blow any investors away shares have matched up impressively with most indexes. While the S&P 500 had an annual return of 9.2% through the first six months of 2025, Freddie Mac stock had risen more than 301%, soaring from slightly less than $1 per share in early 2024 to a little more than $5 by mid-2025.
Does Freddie Mac pay a dividend?
Freddie Mac doesn't pay dividends. The Federal Housing Finance Agency (FHFA), which oversees Freddie Mac and Fannie Mae, announced in 2008 that dividends would be eliminated, except for those on senior preferred stocks issued to the U.S. Treasury as part of the bailout.
ETFs with exposure to Freddie Mac
Exchange-traded funds (ETFs) take much of the guesswork out of stock investing by creating a basket of shares that can be traded like a single stock. This passive approach is especially popular among investors who either don't have time to research individual stocks or want to concentrate part of their portfolio on a particular segment, industry, or geographic region to minimize risk.
Although ETFs can reduce risk, their potential for major profits is also reduced because of their diversity. The funds also generally charge a fee known as an expense ratio, which is used to cover expenses for the ETF's administration.
ETF Expense Ratio
Although Wall Street is renowned for its short attention span, memories of the financial crisis and the role GSEs played in exacerbating a near-economic collapse remain. Interest rates are still stubbornly high, and there's a significant shortage of affordable housing. The federal government has taken only halting steps to release Freddie Mac from its conservatorship.
But since it's a GSE, investors are unlikely to lose everything on a Freddie Mac investment. For risk-averse investors who want to diversify their portfolios and who believe the mortgage market is overdue for a rebound, Freddie Mac shares may be an appropriate part of a balanced, long-term strategy for creating, increasing, and preserving wealth.
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