Freddie Mac Earnings Remain Near Record, Treasury Dividend Rises to $7.0 Billion

by devteam May 8th, 2013 | Share

Freddie Mac is reporting thatrnit earned net income of $4.6 billion in the first quarter of 2013, the secondrnlargest amount in the company’s history, compared to $4.5 billion in the fourthrnquarter of 2012.  Comprehensive incomernwas $7.0 billion, up from 5.7 billion the previous quarter.  The company will require no draw from thernU.S. Treasury for the quarter and will pay a dividend to the Treasury of $7.0rnbillion based on its net worth of $10.0 billion on March 31.  </p

Netrninterest income was $4.3 billion, provision for credit losses of $0.5 billion,rnderivative gains of $0.4 billion and other non-interest income of $0.1rnbillion.  Non-interest expenses werern$(06) billion.  The increase of $124rnmillion in net income for the quarter was primarily due to net securityrnimpairments (which improved from ($1.2) billion to ($0.0) billion) partiallyrnoffset by lower income tax benefits.    </p

Total other comprehensivernincome was $2.4 billion compared to $1.3 billion primarily due to higher fairrnvalue gains on Freddie Mac’s non-agency AFS securities due to spreadrntightening.</p

Freddie Mac has received<bsupport from the U.S. Treasury totaling $71.3 billion since entering federalrnconservatorship in September 2008.  Underrna senior stock purchasing agreement with Treasury $140.5 billion remainsrnavailable for further draws to enable the company to maintain access to debtrnmarkets and have adequate liquidity to conduct normal operations.  Freddie Mac has not made a Treasury draw sincernthe first quarter of 2012.  </p

Underrnan amendment made to the purchasing agreement as of January 1 Freddie Mac is nornlonger allowed to hold a cash reserve. rnAll of the company’s net worth at the end of a quarter that exceeds anrnapplicable capital reserve amount (currently $3.0 billion) will be “swept” into arnTreasury account as a dividend.  The sweep was $5.8 billion in March and today’s earning’s report announced an increase to $7 billion in June.</p

Under the purchase agreement, the payment of dividends cannot be used tornoffset prior Treasury draws. Accordingly,rnwhilernFreddie Mac has paid aggregaterncashrndividends to Treasury of $29.6rnbillion through Marchrn31, 2013 Treasury still maintains a liquidation preference of $72.3 billion on the company’srnsenior preferred stockrnas of March 31, 2013.</p


During the quarter Freddie Mac providedrnfinancing for 96,000 home purchases ($21 billion), 197,000 relief refinancesrnincluding HARP ($33 billion), and 343,000 other refinances ($78 billion).  It also provided financing for 87,000rnmulti-family housing units ($6 billion). </p

The company said it also helped 46,000rnhouseholds avoid foreclosure through 21,000 loan modifications, 8,000 repaymentrnplans, 3,000 forbearance agreements, and 14,000 short sales or deeds-in-lieu ofrnforeclosure transactions.</p

Freddie Mac said the quality ofrnits loan portfolio continues to improve. rnAt the end of the first quarter the single-family serious delinquencyrnraternwas 3.03 percent comparedrntorn3.25 percent atrnDecember 31, 2012.  While therncompany’s single-family serious delinquency rate remains higher than the raternin years prior torn2009, it is substantially below the rate for thernentirernU.S. mortgage market.  Accordingrnto the MortgagernBankers Association’s National Delinquency Survey, the serious delinquency raternon first-lienrnsingle-family loans inrnthe U.S. mortgage market was 6.78 percent at Decemberrn31, 2012, which is thernmostrnrecent date for which data is available.</p

Multifamily delinquency rate (basedrnon loans 60 days or more past due orrnin the process of foreclosure)rnwasrn0.16 percent at March 31,rn2013, compared to 0.19rnpercent at December 31,rn2012, reflecting continuedrnpositive multifamily market fundamentals.

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About the Author


Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, is a PASBA member accountant located in Londonderry, New Hampshire.

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