Freddie Mac posts Q3 profit, seeks no Treasury aid

US mortgage finance giant Freddie Mac reported Tuesday $2.9 billion profit for the third quarter and said it did not need to ask the Treasury Department for additional aid. The government-controlled company, bailed out during the 2008 financial crisis, said it had swung into profit compared with a $4.4 billion loss a year ago, citing improvement in the ailing housing market. The third-quarter net income was just below the $3.0 profit in the second quarter, indicating the lender's recovery was gaining traction after a long slog through heavy losses. In August the Treasury announced an accelerated plan to wind down Freddie Mac and sister institution Fannie Mae, ending a requirement that they pay an annual 10 percent dividend to the Treasury on its preferred stock out of any quarterly profit. At times of losses, the prior rescue plan had meant the companies were locked in a vicious circle of borrowing from the Treasury to pay the dividend. The revamped rescue plan simply sweeps up all profits generated by the two companies each quarter, meaning they will have no retained profits, making it impossible for them to expand their business. At the same time, both will face an accelerated plan to reduce the size of their investment portfolios, which currently total half or more of the country's home loans. The amended rescue plan takes effect on January 1, 2013. Freddie Mac said the slight quarter-on-quarter decline in profit mainly reflected a $455 million increase in its provision for credit losses, related to single-family homes. "Freddie Mac's strong financial performance this quarter was driven by favorable market conditions, including the continued improvement in the housing market, as well as our ongoing efforts to minimize losses on our legacy book," said Freddie Mac chief executive Donald Layton. Layton said the inventory of delinquent loans had fallen to its lowest level in two years and higher-quality new inventory now accounted for 60 percent of the company's portfolio. Freddie Mac and sister institution Fannie Mae, the two government-sponsored mortgage giants, were rescued by the government from the brink of bankruptcy in September 2008 after the housing bubble collapsed. The pair were put under government control as their home-loan losses surged and given a $180 billion bailout. For the second straight quarter, Freddie Mac said it did not require additional aid from the Treasury because it had ended the July-August quarter with a positive net worth, of $4.9 billion, after paying a $1.8 billion quarterly dividend to the Treasury on its preferred stock. As of September 30, Freddie Mac said, the lender had paid about $21.9 billion in cash dividends in total to the Treasury and had requested a total of $71.3 billion in aid.