Freddie Mac, the US-owned mortgage finance company, said its second-quarter profit surged 65% to $5 billion, its second largest ever.
Rising home prices limited credit losses and the company booked big gains on its holdings of financial instruments that benefited from rising interest rates.
Freddie Mac, which has operated under federal conservatorship since it was seized in 2008 during the financial crisis, said that based on its net worth of $7.4 billion, it will make a dividend payment of $4.4 billion to the US Treasury as part of the reimbursement for its rescue aid.
For the second quarter, Freddie's net income rose to $5 billion from $3 billion a year earlier. It was up 9% from the first quarter's $4.6 billion, putting the company on track for record annual profitability.
Lifting the results were a $1.4 billion gain on interest- rate swaps that profited from the rise in interest rates during the quarter. The yield on the benchmark 10-year US Treasury note, to which mortgage rates are tied, rose 1.05 percentage points in the second quarter on fears that the US Federal Reserve may soon scale back its massive stimulus program, called quantitative easing.
The Fed is buying $85 billion a month in Treasuries and mortgage-backed securities backed by Freddie and Fannie, a program that had driven interest rates on mortgage loans to record lows earlier this year.
The Mortgage Bankers Association this week reported the average rate for a 30-year fixed-rate mortgage rose to 4.61% in the latest week, from 4.58% the week before. Rates were below 3.6% in early May and had been below 3.5% back in December.
The return to profitability of Freddie and Fannie in the last two years has largely occurred on the back of a continuing housing market recovery, marked by rising home prices and falling mortgage defaults.
