The government controlled Freddie Mac posted solid earnings of $1.1 billion in the second quarter – after paying the U.S. Treasury Department $1.8 billion in dividends on the preferred stock it owns.
The GSE, a ward of the government for almost four years, will require no financial assistance from the government for the quarter and now has a net worth of $1.1 billion.
The preferred stock Treasury owns in the GSE carries a junk bond-like yield of 10%. If the dividend payment were extinguished, Freddie would have earned roughly $2.9 billion in 2Q.
The company attributed its strong performance to lower credit losses: $200 million in 2Q versus $1.8 billion in the first quarter. Its purchase/issuance volume totaled $215 billion in the first-half compared to $361 billion for all of last year.
In 1Q Freddie earned $600 million but had to pay the U.S. Treasury $1.8 billion in dividends.
To date, Treasury has invested $72.3 billion in Freddie’s preferred, but the GSE has given back $20.1 billion in the form of dividend payments.
The secondary market giant also reported continued strong credit profiles on the borrowers it funds: average FICO scores of 762 and an LTV of 68%. Its single-family serious delinquency rate fell to 3.45% at June 30 compared to 3.51% at March 31.
