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Taxpayers Solidly in the Black on Freddie Bailout

A series of one-time events at the Federal Home Loan Mortgage Corp. pushed earnings significantly higher last year — leaving taxpayers with a tidy profit. But the level of earnings is not expected to continue.

Single-family purchases and issuances amounted to $423 billion during 2013, according to fourth-quarter earnings data released on Thursday.

Volume was virtually unchanged from the previous year, when single-family purchases and issuances came in at $427 billion.

Among all single-family credit guarantee portfolio purchases last year, Freddie said 27 percent were for purchase financing. The 73 percent that were refinances reflected a 15 percent Home Affordable Refinance Program share and an 8 percent non-HARP relief refinance share.

The weighted-average credit score on last year’s single-family purchases was 749, down from 756 in 2012. Weighted-average original loan-to-value ratios slipped to 75 percent from 76 percent.

Multifamily volume drifted down to $26 billion from $29 billion in 2012.

Freddie finished last year with 47,000 real-estate-owned assets.

Repurchase demands issued last year amounted to $10.8 billion.

As of Dec. 31, 2013, there were $2.2 billion in repurchase requests outstanding, down from $3.0 billion at the end of 2012.

Settlements with various financial institutions over private-label mortgage-backed securities contributed $5.5 billion to last year’s earnings, including $4.8 billion in the fourth quarter.

In addition, Freddie reached a $767 million settlement with Lehman Brothers and a $625 million settlement with Morgan Stanley in February. Nearly half of the Lehman settlement was recognized in the fourth quarter.

The McLean, Va.-based company said it earned $9.3 billion prior to taxes during the final three months of last year, surging from $6.5 billion in the third quarter.

For all of 2013, pre-tax income shot up to $25.4 billion from $9.4 billion in 2012.

“The increase primarily reflects higher other non-interest income driven by higher private label securities litigation settlement proceeds, as well as a shift from derivative losses in the third quarter to derivative gains in the fourth quarter,” the report said. :These favorable impacts were partially offset by higher net impairment expense and a lower benefit for credit losses.”

Last year’s after-tax earnings reflected a full-year tax benefit of $23.3 billion from the release of deferred tax asset valuation allowance.

Freddie noted that the recent level of earnings is not sustainable over the long term.

The secondary lender reported that including a first-quarter 2014 dividend payment of $10.4 billion, it has paid $81.8 billion in total dividends to the Department of the Treasury– more than the $72.3 billion in Treasury draws it has received since being bailed out in September 2008.

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