Weather Forecast


Funding for government lapses as short-term spending bill stalls in the Senate

Freddie Mac posts second-quarter profit on housing recovery

The headquarters of mortgage lender Freddie Mac is seen in Mclean, Virginia, near Washington, in this September 8, 2008 file photo. (Credit: Reuters/Jason Reed/Files)

WASHINGTON (Reuters) - Freddie Mac (FMCC.OB: Quote, Profile, Research, Stock Buzz), the U.S.-owned mortgage finance company, on Wednesday posted a $5.0 billion second-quarter profit, the second-largest in the company's history.

Freddie Mac, which has operated under federal conservatorship since it was seized in 2008 during the financial crisis, said it will make a $4.4 billion dividend payment to the U.S. Treasury for its rescue aid.

The company has held off on writing-up $28.6 billion in tax assets, according to a press release. The so-called deffered tax assets could boost the amount of money the company returns to the Treasury.

The return to profitability of both Freddie Mac and its larger sister-company, Fannie Mae (FNMA.OB: Quote, Profile, Research, Stock Buzz), has largely occurred on the back of the continuing housing market recovery, marked by rising home prices and falling mortgage delinquencies.

Freddie Mac is required to pay everything above $3 billion to the Treasury in return for taxpayer aid under existing bailout terms. Combined, Freddie Mac and Fannie Mae have received $187.5 billion in assistance since they were seized amid losses on soured loans that pushed them toward insolvency.

The two companies have paid nearly $132 billion in dividend payments. Freddie expects to pay the Treasury the $4.4 billion dividend payment by September.

The debate over how to restructure Fannie Mae and Freddie Mac, along with the broader mortgage market, has kicked off in Congress. President Barack Obama on Tuesday said he wants a smaller federal role in the housing finance system. Any new structure is expected to take years, as lawmakers dismantle and replace the firms.

Both companies have said they expect to remain profitable. The reversal of fortune has led speculators to bet that the companies might repay their debt to taxpayers and exit government control. Investors have snapped up the preferred shares of the companies. Housing groups have also called for Fannie and Freddie to start paying into a government trust fund to support affordable housing.

(Reporting By Margaret Chadbourn Editing by W Simon)