The government-controlled organization stated that the third-quarter loss is a reflection of accounting measures, and maintains that its business continues to improve and remains strong.
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Net interest income for the quarter increased to $3.743 billion from $3.663 billion in the prior year.
Freddie Mac the mortgage giant posted a net loss of $475 million for its third quarter, as it was hit with losses on investments used to hedge against interest rate swings.
Volatile interest rates and reduced capital cushions for the two companies, under their agreements with the government, “will likely make both enterprises increasingly susceptible to the possibility of quarterly losses that could result in draws” from the Treasury, Mel Watt, director of the Federal Housing Finance Agency, said in a statement Tuesday.
The company said no dividend would be paid to the U.S. Treasury in December.
Freddie Mac said its loss was driven by interest rate changes that soured the value of derivatives it holds.
The drop in Freddie’s income was largely due to derivatives losses, which totaled $4.2 billion.
Under conservatorship, the two mortgage-finance companies are required to turn over to Treasury all profits above a minimum net worth threshold. However, for the last few years, the companies have been immensely profitable, sending the government more than they took. Instead they buy them from lenders, wrap them into securities and provide guarantees to make investors whole if the loans default.
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A plan to phase out Fannie and Freddie and instead use mainly private insurers to backstop home loans advanced in the Senate previous year and was endorsed by the White House. “We can’t simply put the blinders on and say that Fannie and Freddie are just like other companies when taxpayers are on the hook if they go in the red”, said Rep. Ed Royce, R-California, who is sponsoring the House bill to cap the CEO pay.
