Freddie Mac Didn't Need Treasury Draw This Last Quarter

Freddie Mac has reported its earnings, but most investors are out of the name now. At this point, it and cousin Fannie Mae, just remain sore topics for Main Street and for Wall St. Still, what do you do when you see that Freddie Mac is reporting a whopping $3 billion in net income for the second quarter? The mortgage giant said its comprehensive income was $2.9 billion and that no draw from the Treasury was needed.

Could it really be true? Freddie Mac said that the $3 billion in net income was driven by a $1.7 billion decline in the provision for credit losses compared to the first quarter and its comprehensive income was enough to pay $1.8 billion in dividends to the senior preferred stock (supposedly paid to taxpayers, via the Treasury). The claim is that as no Treasury draw is required, the net worth as of June 30 was $1.1 billion.

It is probably worth noting that Freddie Mac’s net interest income was down $100 million from the first quarter to $4.4 billion in the second quarter. The provision for credit losses sequentially went from $1.8 billion to almost $200 million. The loss from derivatives fell to $900 million in the second quarter from $1.1 billion in the first quarter.

As far as those taxpayer payments the bailed-out mortgage giant said, “Through June 30, 2012, Freddie Mac has paid approximately $20.1 billion in cash dividends to Treasury on the 10% senior preferred stock. This represents 28 percent of the company’s cumulative draws received under the Purchase Agreement with Treasury.”

JON C. OGG