Freddie Mac to Send $1.7 Billion Payment to Treasury

Mortgage-finance company Freddie Mac said it would send a $1.7 billion payment to the Treasury in March as it reported a higher profit for the fourth quarter, driven by increased interest rates.

Freddie posted a profit of $2.16 billion, up from a prior-year profit of $227 million. The latest quarter included a net $300 million gain related to higher interest rates, which increased the value of the derivatives that Freddie uses to hedge interest-rate risk. Those derivatives gained $744 million in the quarter.

In the prior-year period, Freddie saw derivative losses of $3.4 billion amid declining long-term interest rates.

Freddie and mortgage-finance firm Fannie Mae were put into a so-called conservatorship under government control during the 2008 financial crisis, eventually receiving nearly $188 billion in support from the U.S. Treasury.

The companies have recently been caught between shareholders and civil-rights groups who want to see them freed from government control, a White House that believes the current system is broken, and a Congress that can't come to agreement on what the future system should be.

Under the current terms of its bailout, the companies must send nearly all of their profits to the government in the form of dividends and wind down their capital buffers over time.

After Freddie's March payment, the company will have sent $98.2 billion to the Treasury, compared with the $71.3 billion infusion it had received.

Amid improvement in the housing market, the company saw its serious delinquency rate improve to 1.32% at the end of the year, its lowest level since September 2008.

Fannie and Feddie don't make loans. Instead they buy them from lenders, wrap them into securities and provide guarantees to make investors whole if the loans default.

Write to Chelsey Dulaney at [e-mail]

(END) Dow Jones Newswires

February 18, 2016 08:25 ET (13:25 GMT)

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