Second Largest Profit Ever for Freddie Mac

FreddiernMac has again reported strong quarterly financial results with netrnincome in the second quarter of 2013 coming in at $5.0 billion, $0.6rnbillion more than one year earlier. This was the seventh consecutivernquarter the company, operating under federal conservatorship, hasrnshowed a profit and it was the second largest profit in the company’srnhistory.</p

Netrncomprehensive income was down from its record first quarter total ofrn$7.0 billion to $4.4 billion. The change was due entirely to a $3rnbillion drop in Comprehensive Income from $2.4 billion in the firstrnquarter to ($0.6) billion in the second. The company said therndecrease primarily reflects changes in the fair values on therncompany’s non-agency available-for-sale (AFS) securities whichrnfluctuate considerably from quarter to quarter due to marketrnconditions. </p

Basedrnon its net worth of $7.4 billion at the end of the quarter, therncompany will pay a dividend of $4.4 billion to the U.S. Treasury. This will bring the aggegate total of dividends paid to Treasury torn$41 billion, none of which may be used to retire Freddie Mac’srnoutstanding obligation to Treasury of $72.3 billion. The companyrnwill not require an additional Treasury draw this quarter. </p

FreddiernMac’s Investments segment earned $3.3 billion in the second quarterrncompared to $2.8 billion in the first with the increase comingrnprimarily from higher derivative gains. The Single-Family Guaranteernsegment earned $1.3 billion compared to $1.2 billion with the changernattributable to higher REO operations income and higher benefit forrncredit losses. Earnings from the Multifamily segment fell from $585rnmillion in the first quarter to $393 million in the second because ofrnhigher losses on mortgage loans recorded at fair value due to spreadrnwidening.</p

Therncompany said its post-2008 book of business, considered to be of muchrnhigher credit quality than earlier loans – especially thosernorigination in 2005 to 2007 – grew to 70 percent of its single-familyrncredit guarantee portfolio during the second quarter. Twenty percentrnof this portfolio is composed of relief refinance loans includingrnthose originated through the Home Affordable Refinance Programrn(HARP.)</p

Singlernfamily delinquencies decreased to 2.79 percent of the portfoliorncompared to 3.03 percent at the end of the first quarter andrnmultifamily delinquencies fell from 0.16 percent to 0.09 percent.

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