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Mortgage giant Freddie Mac posts $4.5B net income for Q4; doesn't request new federal aid

By: Marcy Gordon, The Associated Press

Posted: 02/28/2013 4:36 PM | Comments: 0

WASHINGTON - Mortgage giant Freddie Mac earned $4.5 billion from October through December, its fifth straight profitable quarter. The government-controlled company credited fewer delinquencies on home loans and rising home prices for the gains.

Freddie said Thursday that it paid a dividend of $1.8 billion to the U.S. Treasury and requested no additional federal aid.

The earnings compared with net income of $619 million in the fourth quarter of 2011.

The government rescued Freddie and larger sibling Fannie Mae during the financial crisis after both incurred massive losses on risky mortgages. Taxpayers have spent about $170 billion to rescue Freddie and larger sibling Fannie Mae, the costliest bailout of the crisis. So far, the companies have repaid a combined $52.3 billion.

Under a federal policy adopted last summer, Fannie and Freddie must turn over their quarterly profits to the government. The change was made to ensure they pay the government back.

"It's clear from our earnings that the housing market has turned a corner and that our work to minimize (mortgage) losses ... is paying off," Freddie CEO Donald Layton said in a statement.

For all of 2012, Freddie had net income of $11 billion, compared with a net loss of $5.3 billion in 2011.

Freddie, based in McLean, Va., requested no government aid in the second and third quarters last year, after asking for $19 million in the first quarter. The company received $7.6 billion for all of 2011 and $13 billion for all of 2010.

Freddie and Washington-based Fannie own or guarantee about half of all U.S. mortgages, or nearly 31 million home loans. Those loans are worth more than $5 trillion. Along with other federal agencies, they back roughly 90 per cent of new mortgages.

The housing market has started to recover more than five years after the bubble burst. Home sales are up from a year ago, helped by a limited supply and record-low mortgage rates. Builders are more confident and have started to construct more homes. And home prices are showing consistent gains.

A measure of the number of Americans who signed contracts to buy homes rose in January from December to the highest level in more than 2 1/2 years, the National Association of Realtors reported Wednesday. The increase suggests that sales of previously occupied homes will continue rising in the coming months.

Sales of previously occupied homes ticked up in January after rising to their highest level in five years in 2012. And new-home sales jumped 16 per cent last month from December to the highest level since July 2008, the Commerce Department said Tuesday. Home prices, meanwhile, rose by the most in more than six years in the 12 months ending in December.

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