Mortgage-finance company Freddie Mac will send the U.S. Treasury
Department $3.9 billion in September, after posting a sharp
increase in profit during its second quarter.
The company said net income grew to $4.17 from $1.36 billion in
the prior-year period. The profit was driven by net interest income
of $3.97 billion, up 13% from $3.5 billion a year earlier.
Interest-rate volatility also drove $3.1 billion in derivative
gains.
Freddie, along with mortgage-finance firm Fannie Mae, was put
into a conservatorship by the U.S. government in September 2008
after crisis-era losses.
Freddie received about $71.3 billion in support from the
Treasury. After the expected September payment, Freddie will have
paid back $96.5 billion.
Freddie doesn't make loans, but buys them from lenders, wraps
them into securities and guarantees to make investors whole if the
loans default.
As policy makers continue to debate the future of the companies,
Freddie and Fannie are slowly reaching what could be described as a
normal operating environment. Although the companies' profits had
been partly driven by large postcrisis settlements with lenders on
crisis-era mistakes, much of that is behind them.
Likewise, as home prices have risen and borrowers' credit
quality has improved, Freddie has seen fewer defaults. Freddie said
its single-family serious delinquency rate was 1.53%, down from
2.07% a year earlier.
Freddie Mac and Fannie Mae have come under scrutiny recently
after their regulator awarded the companies' chief executives
multimillion-dollar pay increases. Last week, the House Financial
Services Committee approved a bill that would limit the CEOs' pay
to $600,000 a year.
Write to Chelsey Dulaney at Chelsey.Dulaney@wsj.com
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