Freddie Posts Third Quarter Profit on Improving Market
Freddie Mac is losing less money on homes that go through foreclosure, which helped the mortgage giant post a $2.9 billion profit in the third quarter. This marked a major turnaround for Freddie after a $4.4 billion loss it posted one year earlier.
As home prices stabilize and foreclosures drop, Freddie has seen the loans it holds perform much more strongly, ”driven by favorable market conditions, including the continued improvement in the housing market, as well as our ongoing efforts to minimize losses on our legacy book,” says Donald Layton, Freddie Mac’s chief executive.
Over the last four years, Freddie, along with Fannie Mae, have tightened mortgage credit standards, prompted by a flood of risky loans that defaulted from 2005 to 2008.
According to Freddie, home prices through September have risen 4.3 percent compared to year ago levels — the largest year-over-year gain in six years.
Freddie’s profit in the third quarter marks the second consecutive quarter that Freddie hasn’t required any extra bailout money from the U.S. government. Fannie and Freddie have required nearly $187 billion in aid the last few years. So far, it has returned about $47 billion of that in dividends.
Fannie hasn’t reported its third quarter figures yet. During the second quarter, Fannie moved to a $5.1 billion profit.
Source: “Freddie Mac Profit Shows Continued Turnaround,” The Wall Street Journal (Nov. 6, 2012)