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From the put-on-a-happy-face department: Despite dismal numbers within an unmistakably terrible first quarter earnings report, Freddie Mac CEO Donald H. Layton insisted that the government-sponsored enterprise’s “first quarter business results continued to be strong.”
The government-sponsored enterprise (GSE) reported a net loss of $354 million for the first quarter, a hefty drop from the net income of $2.2 billion in the fourth quarter of 2015. Freddie Mac also reported a comprehensive loss of $200 million for the first quarter, a dramatic plummet from the comprehensive income of $1.6 billion in the previous quarter.
Freddie Mac blamed the poor first quarter results on a $1.4 billion after-tax estimated fair value loss due to decreasing interest rates and an additional $600 million after-tax estimated loss created as spreads on certain mortgage loans and mortgage-related securities measured at fair value widened during the first three months of this year. However, Layton issued a statement that gave the impression that the first quarter was an exercise in profits, with only a scant acknowledgement that all was not well.
“Freddie Mac’s first quarter business results continued to be strong, reflecting our transformation to be a more competitive company,” Layton said. “We’re serving our customers better and also more effectively executing on our mission to responsibly support homeowners and renters nationwide. The percentage of our purchases of loans to first-time homebuyers hit a 10-year high and we continue to finance record levels of rental housing. Also, the transfer of mortgage credit risk away from taxpayers, which we pioneered, proved its resiliency through the quarter’s significant financial market distress. While the resulting flight-to-quality decrease in interest rates reduced our GAAP results this quarter, an impact which is non-economic in nature, the fundamentals of our business are very solid and continue to improve.”