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Today, Freddie Mac announced its net income for 2014 which amounted to $7.7 billion, down $41 billion from the financial results of 2013.
Despite the sharp decline, the financial results of 2014 is the third consecutive year of profitability for the government-sponsored enterprise (GSE). The comprehensive income for 2014 is $9.4 billion.
Three main reasons accounted for its 2014 financial results. According to a Freddie Mac press release, the following reasons contributed to the results:
- Net interest income of $14.3 billion
- Settlement income of $6.1 billion related to private-label securities litigation
- Derivative losses of $8.3 billion driven predominantly by declining interest rates
However, the amount of derivative losses is less critical than what the reported number portrays. The derivative portfolio is used to economically hedge Freddie Mac’s interest-rate risk exposure. Due to timing mismatches that influenced earnings and certain fair value changes not included in GAAP earnings, the reported derivative losses are not truly representative of the underlying economics of Freddie Mac.
Taxpayers as a whole received $19.6 billion from Freddie Mac to bring the total cumulative cash dividends to the Treasury at $91.8 billion by March of this year. The March 2015 obligation will be at $0.9 billion.
Freddie Mac, along with Fannie Mae, is currently under conservatorship run by the Federal Housing Finance Agency (FHFA) but has made great strides which is evident in the net income report released today.
For more information, visit freddiemac.com/investors.