Profitable Again: Freddie Mac Posts $1.2 Billion Net Income in 2nd Quarter

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freddie mac profitable By Marcy Gordon

WASHINGTON -- Government-controlled mortgage giant Freddie Mac posted net income of $1.2 billion for the second quarter and isn't requesting any additional federal aid for the period.

The government rescued Freddie and larger sibling Fannie Mae in September 2008 after massive losses on risky mortgages threatened to topple them.

Taxpayers have spent about $170 billion to rescue Fannie and Freddie, the costliest bailout of the 2008 financial crisis. It could cost about $200 billion more to support the companies through 2014 after subtracting dividend payments, according to the government.

This is the fifth quarter in which Freddie hasn't requested new federal aid since it was taken over in September 2008.

Freddie Mac requested $19 million in federal aid in the first quarter. The company received $7.6 billion for all of 2011 and $13 billion for all of 2010.

McLean, Va.-based Freddie Mac said Tuesday that its net income attributable to common shareholders amounted to 37 cents per share in the April-June period. That compares with a loss of $3.76 billion, or $1.16 per share, in the same period a year ago.

It was Freddie's first profitable quarter since the first quarter of 2011.

Freddie's latest results take into account $1.8 billion in dividend payments that Freddie made to the government, its primary shareholder. The company said the gain reflected a decrease in the amounts that it had to set aside to cover potential losses on mortgages as the housing market has improved.

Fannie and Freddie are required to pay 10 percent dividends on the government money they receive.

Freddie has paid more to the government in dividends than it has taken in aid in the last six quarters, the company says.

Twenty-eight percent of the company's holdings are home loans issued between 2005 and 2008, which accounted for 88 percent of its losses in the first six months of the year.

Freddie said those loans are becoming a smaller proportion of its portfolio, and that over time that should have a positive impact on its finances.

Freddie and Washington-based Fannie own or guarantee about half of all U.S. mortgages, or nearly 31 million home loans, which are worth more than $5 trillion. Along with other federal agencies, they backed nearly 90 percent of new mortgages over the past year.

The housing market has slowly begun to improve, but has a long way to go before it's healthy. Many homeowners are still defaulting on their mortgages. Unemployment remains high at 8.3 percent.

9 PHOTOS
Celebrity Foreclosures
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Profitable Again: Freddie Mac Posts $1.2 Billion Net Income in 2nd Quarter

Reality TV star Kristin Cavallari's family home in Laguna Beach, Calif., was foreclosed on earlier this year, according to public records.

See more photos of the 7,100-square-foot estate on Zillow.

Last July, Crain's Chicago Business reported that R&B singer R. Kelly faced a $2.9 million foreclosure lawsuit on his mansion in Olympia Fields, Ill. The complaint said that Kelly hadn't paid his mortgage in over a year. See the rest of the story on Zillow.

Actor Nicolas Cage got in trouble with the IRS in 2009 when it put a lien on some of his properties to make up for the $6 million that he owed on purchases made in 2007. His $35 million Tudor Mansion in Bel Air sold in foreclosure for just $10.5 million. See more on AOL Real Estate about homes sold by Nicolas Cage at a loss.

Comedian/actor Chris Tucker got caught big-time in the housing crisis. A central Florida lakefront house that he purchased for $6 million in 2007 -- right before the housing market crashed -- was appraised at just $1.6 million in 2011. The bank claimed that he owed more than $4.4 million on the home, putting his mortgage seriously underwater. Read more on AOL Real Estate about Chris Tucker's foreclosure crisis.

In September 2010, Grammy winner Toni Braxton filed for bankruptcy. She owed over $50 million, but her assets only totaled $10 million. To make up some of the debt, her $2.6 million home in Nevada was sold in foreclosure for a little more than $1 million. Read more on AOL Real Estate about Toni Braxton's financial troubles.

Former NFL star Terrel Owens is having a bad year when it comes to real estate. In May, he faced foreclosure on a condo that he owned in Sunny Isles Beach, Fla., because he had stopped paying his mortgage in the fall of 2011. Earlier in 2012, two of his Dallas properties fell into foreclosure. Read more about Terrell Owens' many foreclosed properties on AOL Real Estate.

NBA legend Julius Erving (aka Dr. J) defaulted on his mortgage for his 6,572-square-foot home in St. George, Utah, and faced foreclosure in 2010. Recent property records show that as of March 2012, he no longer owns the home. See more photos on AOL Real Estate of Erving's customized home.

In 2010, Mel Gibson was sued by the construction company that built three of his properties in Malibu, Calif. According to TMZ, Ramage Construction was asking for around $12,000, but, as an alternative, it also asked for permission to foreclose on the homes to satisfy the debt. Gibson listed one of the houses in 2011, so it is likely that he settled the debt and was not foreclosed on. The house is no longer on the market. Read more on Zillow about Mel Gibson's legal trouble.

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Fannie and Freddie buy home loans from banks and other lenders, package them into bonds with a guarantee against default, and then sell them to investors around the world. When property values drop, more homeowners default, either because they are unable to afford the payments or because they owe more than the property is worth. Because of the guarantees, Fannie and Freddie must cover the losses.

Pressure continues on the government to eliminate Fannie and Freddie and reduce taxpayers' exposure to risk. The Treasury Department put forward a plan last year to slowly dissolve the companies, though that process could take years. Abolishing Fannie and Freddie would transform how homes are bought and redefine who can afford them.

Shares of Freddie, whose formal name is Federal Home Loan Mortgage Corp., rose 3 cents to 27 cents per share in morning trading. Its shares have traded in a 52-week range of 18 cents to 42 cents per share.

Copyright 2012 The Associated Press. The information contained in the AP news report may not be published, broadcast, rewritten or otherwise distributed without the prior written authority of The Associated Press. Active hyperlinks have been inserted by AOL.

See also:
High-End Homeowners Racing to Sell Before Tax Cuts End
Michigan Man Buys County's Entire Foreclosure Stock

21 PHOTOS
These Aren't Listing Role 'Models'
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Profitable Again: Freddie Mac Posts $1.2 Billion Net Income in 2nd Quarter

We like "The Wizard of Oz" as much as the next person. But we wouldn't hide the Wicked Witch of the West at the top of the stairs, where she can scare the wits out of potential buyers. "My interest in this house is melting! Melting!" (Thanks to Hooked on Houses.)

Well at least visitors don't have to worry about Lord Voldemort and other dark wizards: This house has a life-size cutout of the Boy Who Lived to protect it.

We mean that literally. If you're interested in this home, you'd better be prepared to drink a lot of coffee, or else be haunted by a Freddy Krueger nightmare. (Thanks to Hooked on Houses.)

The seller would probably like you to notice this home's ample deck space and stone facade -- but we can't take our eyes off the dead critter this guy is holding. (Thanks to Hooked on Houses.)

If it were a 5-year-old buying this house, then perhaps it would be appropriate to use a stuffed bear in every single photo of the listing. But since we're all adults, it just gives us something to make fun of in this gallery. (Thanks to Hooked on Houses.)

If you're as soft as a teddy bear, maybe the wood floor is actually a comfortable place to sleep. 

Not this one! 

Not this one, either! 

Dolls can be creepy (if you don't believe us, check out this collection). So -- remember the bears? -- don't think that using one in all of your listing photos is a good idea.

OK, it's a tossup as to which is scarier: the doll or the Pepto-Bismol pink bathtub. (Thanks to Hooked on Houses.)

Wait -- maybe it's the armless mannequin? That doll is actually starting to look pretty cute by comparison.
 

Didn't we discuss the doll thing?

Some things just aren't meant to be featured in listing photos. And if you do, it's just good manners to close the lid.

Nothing complements your nice patio, trees, outdoor eating area and gorgeous, big pool than a giant inflatable Shamu.

We told you to stop jumping on the bed! 

They'd say, "Buy This House!"

Realtor Joe Goldin of Rodeo Realty used models in listing photos to market this over-the-top "Palace" in Woodland Hills, Calif. But we think they look a little low-rent.

Donald Trump comes to mind when viewing this "classy" billiards room -- not to mention the awkwardly posed models.

Who takes a shower with their coat on?

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