Freddie Mac headquarters in McLean, Va. Freddie Mac on Tuesday reported… (AP Photo/Pablo Martinez…)
WASHINGTON – Seized housing finance giant Freddie Mac on Tuesday reported a $3 billion profit for the second quarter of the year and said it would not request additional federal aid for the period to stay afloat.
The improving housing market meant Freddie Mac set aside $1.7 billion less than it did in the first three months of the year for loan losses, which improved the government-owned company’s bottom line. Freddie Mac posted a $577 million profit in the first quarter and needed $19 million from the government.
Freddie Mac has received about $72.3 billion from taxpayers since it was seized along with its sister company, Fannie Mae, in 2008 as they both were on the brink of bankruptcy because of the collapse of the housing market. The two companies own or back about 60% of all mortgages in the U.S.
Under the government’s conservatorship, Freddie and Fannie have improved their lending standards and the performance of both companies gradually has improved as the housing market has begun healing.
Still, the government has pumped about $188 billion into Fannie and Freddie through June 20. The companies have paid about $46 billion back to the Treasury in dividend required under terms of the bailout, leaving taxpayers on the hook for about $142 billion.
Freddie’s second quarter performance means it will be the fifth quarter since 2008 that the company has not had to request an infusion of federal money to stay solvent. The first quarter of the year was the first time that Fannie Mae did not need federal money. Fannie has yet to report its second quarter earnings.
Freddie had to set aside just $200 million for anticipated loan losses in the second quarter, compared with $1.9 billion in the first quarter, the company said. The change meant the company would be able to make its $1.8 billion dividend payment to the government without going into the red.
Freddie said it was able to provide loan modifications and other assistance to 40,000 struggling homeowners to help them avoid foreclosure.
Last week, the regulator for Freddie and Fannie said the companies would not be allowed to participate in a large-scale Obama administration program to reduce the principal on mortgages of distressed homeowners.
Edward DeMarco, acting director of the Federal Housing Finance Agency, said a lengthy analysis determined that such a program could end up costing taxpayers more money and encourage some homeowners to default.
Administration officials and many Democrats questioned the agency’s findings and said the data showed that in some cases Fannie and Freddie could end up making money through a broad principal reduction program because reduced foreclosures would help improve the housing market.
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