An improving housing market and positive earnings have lead Freddie Mac to release its valuation allowance for deferred tax assets which boosted its third-quarter comprehensive income to $30.5 billion.
The GSE reported $6.5 billion in pretax income for the third quarter along with $24 billion from the valuation allowance for DTAs.
This decision will result in a $30.5 billion dividend payment to the U.S. Treasury in late December that will exceed the $71 billion in total draws that Freddie has received from Treasury under its conservatorship agreement.
Freddie chief executive Donald Layton noted that the total dividend payment will exceed cumulative draws by just $9 billion.
But the CEO reminded reporters that Treasury does not recognize the dividend payments as repayment and it doesn't offset prior draws. In other words, Freddie still owes Treasury $71 billion.
However, its shows Freddie has paid back all the government assistance it received since it was placed in conservatorship in September 2008.
That will prompt some attorneys representing Freddie shareholders to claim that Treasury is no longer entitled to future dividend payments. And lawsuits are expected to be filed to stop the U.S. government from taking shareholder profits.
Freddie executives stressed that rising home prices and the continuing improvement in housing justified recognition of the DTAs.
In addition,
