Freddie Posts Profit. Really?by Tim Manni
The news that government-controlled mortgage giant Freddie Mac posted a second-quarter profit offers the hope that money can once again be made in mortgage lending. It also bodes well that “at this time,” says Freddie, they won’t be asking the government for any additional taxpayer money (emphasis added):
McLean, Virginia-based Freddie Mac rose 54 cents, or 73 percent, to $1.28 at 10:31 a.m. in New York Stock Exchange composite trading after earlier climbing to $1.42. The shares had been trading under $1 for most of the past year.
Freddie Mac booked net income of $768 million in the second quarter on Aug. 7, attributing much of that profit on one-time accounting adjustments, mark-to-market gains due to the rise in interest rates and lower funding costs stemming from its federal financing plan.
“Our financial results allowed us to finish the quarter with a positive net worth, meaning we will not need to request any additional financial support from the government at this time,” John Koskinen, the company’s interim chief executive officer, said in an Aug. 7 statement.
“Granted, Freddie is the smaller cousin to the larger Fannie Mae, but the fact that Freddie registered a quarterly profit raises the hope that there will once again be money to be made in the mortgage-lending industry,” said HSH VP Keith Gumbinger.
On the other hand, the larger, more influential Fannie Mae has, after reporting its eighth consecutive quarterly loss, requested additional taxpayer support:
Washington-based Fannie Mae said its regulator requested US$10.7bil from the Treasury to erase a deficit in its net worth, bringing total draws under a senior preferred stock purchase programme to US$45.9bil.