Freddie Mac secured a significant profit in the third quarter as the company’s book of business improved and the housing market turned around, improving the fundamentals associated with the agency’s loan pools.
The government-sponsored enterprise posted a net third-quarter profit of $2.9 billion, down slightly from $3 billion in the second quarter.
Freddie also finished the period without requiring additional draws on the Treasury and saw its inventory of delinquent loans fall to the lowest level in two years.
Overall, Freddie Mac pulled in $5.6 billion, an amount that allowed the GSE to pay a $1.8 billion dividend to senior preferred stock holders.
Housing statistics within the agencies’ portfolios also showed improvement. Higher quality loans now represent 60% of the firm’s business.
Delinquency rates remained below industry benchmarks with the late-payment rate for single-family loans declining to 3.37% in September. That is down from 3.45% in June. Meanwhile, the multifamily delinquency rate remained unchanged at 0.27%.
Freddie Mac must pay cash dividends to Treasury on the senior preferred stock at an annual rate of 10%. However, it was found that paying this dividend contributed to request for more funds.
On August 17, 2012, Freddie Mac, acting through its conservator the Federal Housing Finance Agency and Treasury ameded the agreement.
Under this amendment, the current fixed dividend rate will be replaced with a net worth sweep dividend beginning in the first quarter of 2013.
“This effectively ends the circular practice of Treasury advancing funds to us to pay dividends back to Treasury,” Freddie Mac said in the filing. “As a result, beginning in 2013, the need for future draws will not be driven by the dividend obligation.”
kpanchuk@housingwire.com
