Government controlled mortgage giant Freddie Mac posted its first true net profit in almost two years, earning $676 million in the first quarter — even after paying the U.S. Treasury a $1.6 billion dividend on the preferred stock it owns.
Late Wednesday afternoon the GSE reported that its total earnings (before dividends) came to a stunning $2.7 billion in the quarter, one of its best ever.
"This was a big week for America," a company spokesman joked.
Not only did it earn money but its net worth now stands at $1.2 billion.
Freddie reported that the serious delinquency rate on its single-family loans fell to 3.63% at March 31, compared to 3.84% at yearend.
The strong showing comes as elected officials in Congress continue to weigh options on how to dismantle the company and its sister firm Fannie Mae. Both were placed into conservatorship in September 2008.
In 4Q, Freddie posted a meager $113 million net loss but earned $1.2 billion before paying a dividend to Treasury.
In 1Q net interest income from its giant mortgage portfolio totaled $4.5 billion, compared to $4.3 billion in the prior quarter.
Among other things, the GSE's earnings received a boost from lower provisioning for bad loans. Provisions for credit losses fell 35% from the fourth quarter to $2 billion in 1Q. A year ago, Freddie set aside $5.4 billion for possible loan losses.
"The decrease in the first quarter 2011 provision was mostly driven by a decrease in delinquent loan inflows and a decline in the rate at which delinquent loans ultimately transition to a loss event," the company said.
However, Freddie sold a near record 32,600 foreclosed properties in the first quarter while its REO expenses ($257 million) rose nearly 15% from the fourth quarter. Freddie had an inventory of nearly 65,200 REO properties as of March 31 after acquiring 24,700 foreclosed houses during the quarter.
"We expect the pace of our REO acquisitions to increase in the remainder of 2011, in part due to the resumption of foreclosure activity by servicers, as well as the transition of many seriously delinquent loans to REO," Freddie said.
The GSE had $3.3 billion in single-family loans that are 90 days for more past due. Meanwhile, charge-offs on single-family loans also rose slightly (3.7%) to $3 billon in the first quarter.
