Freddie Mac on Thursday reported strong fourth quarter and year-end profits driven by a surge in demand for both home purchase and apartment loans.

The higher profits will allow the McLean, Va., company to send $1.7 billion in dividend payments to the Treasury Department in March.

But Freddie Mac Chief Executive Donald Layton warned that the government-sponsored enterprise's obligation to pay dividends to the Treasury could soon deplete its capital reserve. If the mortgage finance giant ends up with a negative net worth, it would have to take a draw from the Treasury in the future.

"We continue to monitor our earnings volatility and the potentially increasing risk that we will have to take a draw from Treasury," Layton said on a conference call Thursday.

Layton's warning came the same day that Federal Housing Finance Agency Director Mel Watt said that Freddie Mac and Fannie Mae's eight-year conservatorship is "unprecedented" and that it poses many risks.

"I am signaling my belief that some of the challenges and risks we are managing are escalating and will continue to do so the longer the enterprises remain in conservatorship," Watt said. "Future draws [from the Treasury] could lead to a legislative response adopted in haste or without the kind of forethought it should be given. I have been clear that conservatorship is not a desirable end state and that Congress needs to tackle the important work of housing finance reform."

Both Freddie and Fannie Mae are required under the terms of conservatorship to reduce their retained capital to zero in 2018. The GSEs have been handcuffed from modernizing their capital structure, which requires congressional action.

In all, Fannie and Freddie have received $187.5 billion from the Treasury but have paid $241 billion back in the form of dividends. Neither company has received a draw from the Treasury since 2012.

Freddie reported a fourth-quarter profit of $2.2 billion, compared with a profit of $227 million a year earlier. Freddie's net income for 2015 fell 17% to $6.4 billion, compared with net income of $7.7 billion in 2014.

Layton said a major highlight for Freddie's annual results was the 38% jump in single-family home purchase volume to $351 billion. The company's serious-delinquency rate fell to a seven-year low of 1.32% at Dec. 31.

Multifamily purchase volume rose 67% in 2015 to $47.3 billion compared with a year earlier.

Freddie's capital buffer was $1.2 billion at year-end, versus $1.8 billion at the end of 2014.

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