Freddie Mac posts $2.1B profit in 3Q

AP News
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Posted: Nov 06, 2014 9:08 AM

WASHINGTON (AP) — Mortgage giant Freddie Mac posted net income of $2.1 billion for the July-through-September period. The government-controlled company has turned a profit in each of the past 12 quarters.

Freddie's third-quarter profit reported Thursday was far smaller than the $30.5 billion it earned in the same period of 2013. But the year-earlier amount reflected an accounting move that allowed Freddie Mac to capitalize on tax benefits it had saved up from its losses on mortgages during the financial crisis.

McLean, Virginia-based Freddie also said it will pay a dividend of $2.8 billion to the U.S. Treasury next month. Freddie will have paid $91 billion in dividends, exceeding its government bailout of $71.3 billion.

The government rescued Freddie and larger sibling Fannie Mae in September 2008.

Freddie said its third-quarter net income was bolstered by reduced losses from derivatives, financial investments used to hedge against swings in interest rates, as most long-term rates rose during the period. The company also cited payments from major banks in settlements resolving federal government claims that the banks misled Freddie about risky mortgage securities they sold before the housing market collapsed in 2007.

Freddie and Fannie own or guarantee about half of all U.S. mortgages, worth about $5 trillion. Along with other federal agencies, they back roughly 90 percent of new home loans.

The two companies don't directly make loans to borrowers. They buy mortgages from lenders, package them as bonds, guarantee them against default and sell them to investors. That helps make loans available.