Under Freddie’s adjusted guarantee fee income calculation, the company reported $1.63 billion in guarantee fee for the second quarter, up from $1.4 billion in the first quarter and $1.4 billion a year ago.
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Freddie provided roughly $103 billion in liquidity to the mortgage market in the quarter, funding almost 392,000 single-family homes and more than 148,000 multifamily rental units, the company reported.
The results were partially due to Freddie’s derivatives portfolio, which lost $2 billion in the second quarter, compared to a $4.6 billion loss in the first quarter.
Freddie and mortgage-finance firm Fannie Mae were put into a so-called conservatorship under government control during the 2008 financial crisis.
The latest quarter included a $400 million hit tied to a decline in interest rates and a $100 million gain from credit spreads.
Because its net worth of $2.1 billion was more than its capital buffer of $1.2 billion, Freddie will send a $933 million dividend to the Treasury for the quarter.
Together the companies received taxpayer aid totaling about $187 billion. The company uses derivatives in an effort to counteract that effect, but because of accounting rules, the derivatives can make large profits or losses appear over short periods.
Fannie and Freddie don’t make loans.
“We had both solid business and financial results this quarter, reflecting further improvement in our competitiveness and capabilities, highlighted by strong new guarantee business volumes”, said Donald Layton, Freddie Mac CEO. Despite the low borrowing rates that could lure prospective homebuyers, the market has remained hampered by tight mortgage credit, rising home prices and stagnating incomes. The homeownership rate in the April-June period was 62.9 percent, down 0.5 percentage point from 63.4 percent in the second quarter of 2015.
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Freddie Mac’s Q2 net income of $993 million-most of which will send to the U.S. Treasury-is a major recovery from its Q1 net loss of $354 million, as is its reported $1.1 billion comprehensive income for Q2, a $1.3 billion upswing from its comprehensive loss of $200 million in Q1.
