WASHINGTON—Mortgage-finance giant Freddie Mac on Tuesday posted a loss for the second time in three quarters, but said no draw from the Treasury Department would be necessary.
The loss means Freddie wasn’t forced to send a dividend payment to the U.S. Treasury, as is normally required when it posts a profit.
But Freddie’s loss wasn’t steep enough to require an infusion of cash from taxpayers. Its capital reserves are slated to fall to zero by 2018, the Wall Street Journal reported.
For the first quarter, Freddie reported a net loss of $354 million, compared with a prior-year profit of $524 million and fourth-quarter earnings of $2.16 billion. It posted a loss of $475 million in the third quarter of 2015.
Freddie said the loss didn’t represent weakness in its underlying business. Rather, the loss was expected after a sharp drop in interest rates and widening of credit spreads in the first quarter.
“Freddie Mac’s first quarter business results continued to be strong, reflecting our transformation to be a more competitive company. We’re serving our customers better and also more effectively executing on our mission to responsibly support homeowners and renters nationwide. The percentage of our purchases of loans to first-time homebuyers hit a 10-year high and we continue to finance record levels of rental housing,” said Freddie Mac CEO Donald H. Layton. “Also, the transfer of mortgage credit risk away from taxpayers, which we pioneered, proved its resiliency through the quarter’s significant financial market distress. While the resulting flight-to-quality decrease in interest rates reduced our GAAP results this quarter, an impact which is non-economic in nature, the fundamentals of our business are very solid and continue to improve.”
Fannie and Freddie have been under the FHFA’s conservatorship since 2008, eventually receiving $187.5 billion in support from the U.S. Treasury.