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Freddie Mac reports 45 percent drop in second-quarter profit due to bad loan provision

Freddie Mac reports 45 percent drop in second-quarter profit due to bad loan provision

Freddie Mac, the second-largest U.S. buyer and guarantor of home mortgages, said Thursday its second-quarter profit fell 45 percent as it had to record larger provisions on its books for bad loans.
The government-sponsored company, which is returning to normalcy after an accounting scandal four years ago, said it earned $764 million (euro560.49 million), or $1.02 per share for the three months ended June 30. That contrasted with profit of $1.4 billion, or $1.93 a share, a year ago.
Revenue rose 4.8 percent to $2.26 billion (euro1.66 billion) from $2.15 billion in the quarter a year ago. Freddie Mac makes money from interest payments on mortgages it holds on its books, and fees from insuring mortgages sold to investors.
The company said it recorded a $320 million (euro234.76 million) provision for credit losses in the second quarter due to problems with loans originated this year and last year, amid a deepening mortgage crisis nationwide that has bankrupted more than 50 lenders.
The earnings results missed Wall Street expectations, with analysts surveyed by Thomson Financial expecting a profit of $1.16 per share on revenue of $1.69 billion (euro1.24 billion).
Freddie Mac, and its larger government-sponsored sibling Fannie Mae, were created by Congress to pump money into the $8 trillion (euro5.87 trillion) home-mortgage market by buying home loans from banks and other lenders and bundling them into securities for sale on Wall Street.


Updated : 2021-03-05 06:35 GMT+08:00