Freddie Mac, the second-largest source of mortgage funding in the US, has said its second-quarter net profits fell 45% from a year earlier as more borrowers defaulted on their loans.
While the $764m in net income fell sharply from the $1.4 billion last year, it reverses three quarters of losses as the business of guaranteeing home mortgages grew.
Chief financial officer Buddy Piszel said failing loans due to the deteriorating housing market were largely responsible for $600m in costs for the quarter.
In a statement, the company said consumers were returning to the traditional, fixed-rate mortgages that Freddie buys and securitises as innovative financing options such as adjustable-rate mortgages fall out of favour.
Non-traditional mortgages helped fuel a housing bubble that began to deflate two years ago as foreclosures and defaults rose.
Piszel said that Freddie's focus on traditional mortgages would allow it to 'weather the storm' that is roiling the housing market.
