Freddie Mac's net income rose to $2.3 billion in the third quarter, the company said Tuesday, a big turnaround from the same point last year, when it lost $475 million due to derivative hedging instruments.
Freddie boosted its purchase of single-family and multifamily loans over the same point last year. It acquired $116 billion in single-family loans, a 23% jump, while multifamily purchases totaled $12 billion, a 10% increase from the third quarter of 2015.
The government-sponsored enterprise was hit with a slight decline in net interest income, which fell 4% to $3.6 billion in the third quarter.
"Single-family purchase volumes were very strong this quarter," said Freddie Mac Chief Executive Don Layton during a conference call with reporters. "The surging refi volume driven by post-Brexit declines in mortgage rates helped make it our biggest single-quarter since late 2013. Our economists also say that the industry is on track to have the best year in terms of home sales in a decade."
It was not all positive news, however. Freddie's profits were trimmed by a $113 million provision for credit losses in the third quarter, compared to a $775 million benefit in the previous quarter. Layton said the provision does not reflect anything regarding Freddie's performance.
Layton pointed to the multifamily market, which has recently had a strong run, leading some to predict a decline.
"Multifamily vacancy rates have flattened out and rents are still going up but not as fast," he said. "We don't see any particular negatives yet. We see the market doing fine just not as strong as it has been."
However, "looking at other asset classes that are starting to struggle" is making "us little bit cautious," Layton said.
Freddie will pay a $2.3 billion dividend to the U.S. Treasury in December under its senior preferred stock agreement. The GSE did not pay a dividend last December because of the $475 million loss.
