Freddie Mac Ditches Dividend Payment; Posts Major 3Q Loss

According to The Wall Street Journal, the net worth of Freddie Mac is $1.3 billion which means despite its $475 million loss, it is not required to get bailed by taxpayers’ money.

The company’s derivatives gains and losses reflect an accounting mismatch between how the derivatives and the assets the derivatives hedge are valued, and the company has said it expects the net effect to be neutral over time.

Freddie and mortgage-finance firm Fannie Mae were put into a so-called conservatorship under government control during the 2008 financial crisis, eventually receiving almost $188 billion in support from the U.S. Treasury.

The company said no dividend would be paid to the U.S. Treasury in December. The company settled with the DOJ in February 2015 for 1 point 4 billion dollars. The government-sponsored enterprise also recorded a comprehensive loss of $501 million for the third quarter, far below the comprehensive income of $3.9 billion for the second quarter.

The company, which is controlled by the government, said on Tuesday that the loss from the quarter reflected measures taking in accounting, while its business continued to be strong and continued to improve.

At the same time, the companies have been whittling down their mortgage holdings and transferring risky loans to the private market, away from taxpayers – a trend that is likely to reduce their revenue.

“Freddie Mac’s financial disclosures have consistently highlighted how accounting rules and changes in interest rates could negatively affect their quarterly earnings”, Federal Housing Finance Agency Director Melvin Watt said in a statement. A few private shareholders of Fannie and Freddie are challenging that arrangement in court.

Neither of the two makes direct loans to borrowers. They buy mortgages from lenders, package them as bonds, guarantee them against default and sell them to investors. However, for the last few years, the companies have been immensely profitable, sending the government more than they took. No work on the proposal has been done this year in the current Congress. “Taxpayers remain on the hook for losses incurred” by the companies.