Freddie Mac to Send $1.7 Billion Payment to Treasury
February 18 2016 - 08:40AM
Dow Jones News
Mortgage-finance company Freddie Mac said it would send a $1.7
billion payment to the Treasury in March as it reported a higher
profit for the fourth quarter, driven by increased interest
rates.
Freddie posted a profit of $2.16 billion, up from a prior-year
profit of $227 million. The latest quarter included a net $300
million gain related to higher interest rates, which increased the
value of the derivatives that Freddie uses to hedge interest-rate
risk. Those derivatives gained $744 million in the quarter.
In the prior-year period, Freddie saw derivative losses of $3.4
billion amid declining long-term interest rates.
Freddie and mortgage-finance firm Fannie Mae were put into a
so-called conservatorship under government control during the 2008
financial crisis, eventually receiving nearly $188 billion in
support from the U.S. Treasury.
The companies have recently been caught between shareholders and
civil-rights groups who want to see them freed from government
control, a White House that believes the current system is broken,
and a Congress that can't come to agreement on what the future
system should be.
Under the current terms of its bailout, the companies must send
nearly all of their profits to the government in the form of
dividends and wind down their capital buffers over time.
After Freddie's March payment, the company will have sent $98.2
billion to the Treasury, compared with the $71.3 billion infusion
it had received.
Amid improvement in the housing market, the company saw its
serious delinquency rate improve to 1.32% at the end of the year,
its lowest level since September 2008.
Fannie and Feddie don't make loans. Instead they buy them from
lenders, wrap them into securities and provide guarantees to make
investors whole if the loans default.
Write to Chelsey Dulaney at Chelsey.Dulaney@wsj.com
(END) Dow Jones Newswires
February 18, 2016 08:25 ET (13:25 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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