Freddie Mac surprised Wall Street by announcing that it swung to a profit in the second quarter, its first profit in the past two years. The mortgage company also said it does not require additional financial aid from the government at this time.
The company, which is under federal conservatorship, posted a second quarter profit of $768 million compared to an $821 million loss recorded in the same quarter last year. The result also is a marked improvement from the first quarter loss of $9.9 million the company reported three months ago.
After paying out $1.1 billion in dividends on the preferred stock held by the U.S. Treasury Department; Freddie Mac posted a per share loss of 11 cents. The adjusted loss is much smaller than the loss of a $1.63 a share recorded in the same quarter a year earlier.
Freddie Mac finished the quarter with a net worth of $8.2 billion, bolstered by a $5.1 million increase in equity courtesy of incorporating accounting rules that dictate how losses are recognized. The company also benefited from a jump in net interest income due to a $4.2 billion gain in its derivative portfolio.
Fannie Mae, Freddie Mac’s sibling company, requested an additional $10.7 billion in government funds after its net worth fell below zero following a $15 billion second quarter loss.
Revenue surged for Freddie Mac in the second quarter to $7.47 billion, up from $1.59 billion last year. Falling provisions for credit loss helped the bottom line as well with just $5.2 billion set aside in the period, down from the $8.8 billion designated in second quarter last year.
Freddie Mac completed 15,603 loan modifications in the second quarter, more than tripled the amount done last year. Along with its loan modification program, the company has also helped 28.500 additional borrowers stay in their homes through its Freddie Mac Relief Refinance Mortgage program.
