As the housing market continues to struggle and people use cash advances as short-term coverage for mortgage payments, good news recently emerged from mortgage finance company Freddie Mac. The government-owned entity reported that a shrinking amount of foreclosed properties and delinquent loans enabled it to post a first-quarter 2011 profit of $676 million. This allowed it avoid recent need for Treasury Department assistance.
For the three-month period ending March 31, Freddie Mac reported a $1.2 billion net worth. This is especially commendable because that figure was net of a $1.6 billion payment of quarterly dividends to the Treasury. As a nearly 80 percent stakeholder, the government is entitled to a large dividend.
Just one year prior, Freddie Mac experienced a $6.7 billion loss.
Provisions for credit loss continued their decline for the fifth consecutive quarter, falling from $3.1 billion at the end of December to $2 billion as of March 31. Serious loan delinquencies dropped from 3.84 percent in the previous quarter to 3.63 percent. Ross J. Kari, Freddie Mac chief financial officer, commented on the continued gradually improving performance of guaranteed credits.
Mr. Kari revealed that the largest challenge currently results from loans issued between 2005 and 2008. However, this portion of the portfolio is decreasing as these loans are foreclosed, modified, or refinanced. Since December, Freddie Mac has seen its foreclosed home inventory decrease by over 6,900 units, landing at 65,159 properties.
The first quarter 2011 profit was the second since federal regulators assumed control of Freddie Mac in September 2008 following collapse of the mortgage market. During second quarter 2009, the organization had a $768 million profit.
This was partly due to one-time accounting adjustments. In the following quarter, Freddie Mac was able to avoid needing Treasury aid. Freddie Mac and rival Fannie Mae guarantee or own over half of the home loans in the U.S.
