Freddie Mac in Profit: ‘It’s Clear Housing Market has Turned the Corner’

Freddie Mac in Profit: ‘It’s Clear Housing Market has Turned the Corner’Freddie Mac, the smaller of the two government-backed financing companies that had been living off quarterly bailouts, reported a net income of $11 billion for all of 2012, compared with a net loss of $5.3 billion in 2011.
The firmer footing of both Freddie and Fannie Mae last year may be one of the strongest indicators of a truly rebounding housing market, with prices making slow but steady gains and fewer mortgage delinquencies.
Based in McLean, Virginia, Freddie also reported a net income of $4.5 billion for the three months ended Dec. 31, after accounting for a $5.8 billion dividend payment to the U.S. Treasury’s stake.
“In 2012, Freddie Mac significantly improved its financial performance and returned more than $7 billion to America’s taxpayers through dividends,” said Freddie Mac CEO Donald H. Layton. “It’s clear from our earnings that the housing market has turned a corner and that our work to minimize legacy losses and build a strong new book of business is paying off.”
Since the government takeover of Fannie and Freddie in the fall of 2008, both entities have received nearly $190 billion to cover quarterly shortfalls. Both companies had been saddled with billions in toxic mortgages, jeopardizing their mission of providing liquidity to the ailing housing-finance industry. The Treasury’s credit line remains open, but its need is waning.
Freddie Mac has paid $23.8 billion in dividends, about a third of the amount it has taken in Treasury assistance.
Refinance activity is driving much of Freddie’s business. Refinance purchases of $351 billion accounted for 82 percent of the company’s single-family mortgage purchase volume last year.
Freddie estimates that homeowners who refinanced in 2012 saved an average $3,200 in interest payments during the first 12 months.
Refinance mortgages through the government’s Home Affordable Refinance Program (HARP) accounted for 35 percent of the company’s total refinance volume in 2012, more than doubling the amount compared to 2011. HARP targets borrowers with loan-to-values (LTVs) higher than 80 percent, or “underwater” homeowners who owe more than the value of their homes.
Credit quality is also improving in Freddie’s portfolios. Total single-family loans, including refinance mortgages, purchased by Freddie in 2012 had a weighted average FICO credit score of 756 and an average original LTV ratio of 76 percent.

Leave a Reply

Your email address will not be published. Required fields are marked *