Industry News

Rising interest rates boost Freddie Mac earnings

Trend expected to reverse in third quarter

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Rising interest rates helped government-sponsored mortgage repurchaser Freddie Mac boost second quarter earnings, but managers expect declining interest rates will inflict a "significant reversal" of such gains in the third quarter. Freddie Mac today released preliminary results for the first half of the year, estimating the company generated $1.2 billion in net income in the second quarter and $2.7 billion for the year. Freddie Mac's latest projection of year-to-date net income is up about $300 million from an earlier estimate at the end of July. Most of the boost in net income -- about $200 million -- came from adjustments in Freddie Mac's mortgage guarantee business. Net income "benefited significantly from mark-to-market gains recorded for its guarantee asset and derivatives, as interest rates increased during the first half of the year," the company said in a press release. But given that interest rates have fallen about 50 basis points since June 30, Freddie Mac expects to rep...