Citing accounting associated with derivatives it used to hedge its operations, Freddie Mac announced a loss of hundreds of millions of dollars in the third quarter of 2015 Nov. 4.
According to the announcement, the government-sponsored enterprise that shares the secondary mortgage market with Fannie Mae lost a net $475 million in the third quarter. That compared to a net income of $4.2 billion in the previous quarter.
"For the first time in four years, Freddie Mac had a net loss in the most recent quarter," Freddie Mac CEO Donald Layton said. "This $0.5 billion loss was caused mainly by the accounting associated with our use of derivatives, whereby the derivatives are marked to market but many of the assets and liabilities being hedged are not. The resulting difference between GAAP reporting and the actual underlying economics, which has created significant GAAP income volatility in our quarterly financial statements, reduced the after tax earnings in the quarter by an estimated $1.5 billion as interest rates declined significantly."
Complete your profile to continue reading and get FREE access to CUTimes.com, part of your ALM digital membership.
Your access to unlimited CUTimes.com content isn’t changing.
Once you are an ALM digital member, you’ll receive:
- Critical CUTimes.com information including comprehensive product and service provider listings via the Marketplace Directory, CU Careers, resources from industry leaders, webcasts, and breaking news, analysis and more with our informative Newsletters.
- Exclusive discounts on ALM and CU Times events.
- Access to other award-winning ALM websites including Law.com and GlobeSt.com.
Already have an account? Sign In
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
