Second Largest Profit Ever for Freddie Mac

Freddie Mac has again reported strong quarterly financial results with net income in the second quarter of 2013 coming in at $5.0 billion, $0.6 billion more than one year earlier. This was the seventh consecutive quarter the company, operating under federal conservatorship, has showed a profit and it was the second largest profit in the company's history.

Net comprehensive income was down from its record first quarter total of $7.0 billion to $4.4 billion. The change was due entirely to a $3 billion drop in Comprehensive Income from $2.4 billion in the first quarter to ($0.6) billion in the second. The company said the decrease primarily reflects changes in the fair values on the company's non-agency available-for-sale (AFS) securities which fluctuate considerably from quarter to quarter due to market conditions.

Based on its net worth of $7.4 billion at the end of the quarter, the company will pay a dividend of $4.4 billion to the U.S. Treasury. This will bring the aggegate total of dividends paid to Treasury to $41 billion, none of which may be used to retire Freddie Mac's outstanding obligation to Treasury of $72.3 billion. The company will not require an additional Treasury draw this quarter.

Freddie Mac's Investments segment earned $3.3 billion in the second quarter compared to $2.8 billion in the first with the increase coming primarily from higher derivative gains. The Single-Family Guarantee segment earned $1.3 billion compared to $1.2 billion with the change attributable to higher REO operations income and higher benefit for credit losses. Earnings from the Multifamily segment fell from $585 million in the first quarter to $393 million in the second because of higher losses on mortgage loans recorded at fair value due to spread widening.

The company said its post-2008 book of business, considered to be of much higher credit quality than earlier loans - especially those origination in 2005 to 2007 - grew to 70 percent of its single-family credit guarantee portfolio during the second quarter. Twenty percent of this portfolio is composed of relief refinance loans including those originated through the Home Affordable Refinance Program (HARP.)

Single family delinquencies decreased to 2.79 percent of the portfolio compared to 3.03 percent at the end of the first quarter and multifamily delinquencies fell from 0.16 percent to 0.09 percent.