The collapse of the real estate market almost saw the demise of mortgage giants Freddie Mac and Fannie Mae. Both companies received billions in bailout but analysts say that the two companies will be among those that will have an long hard road to recovery.
Freddie Mac, in an interesting twist to recession story, reported its first quarterly profit in two years. Gains from hedges and an accounting change were enough to combat credit losses. The company announced that it will not be needing any additional funds from the government for now.
Still, Freddie Mac relies on TARP funds to keep its business running. The well-being of the two companies is seen as an indicator of the US housing market.
“Our outlook remains cautious due to rising foreclosures, growing unemployment, tight lending standards, and buyers’ reluctance to reenter the market,” says Freddie intermin CEO John Koskinen.
The quarter saw Freddie generate a net of $768 million but is dwarfed by the $9.9 billion in the first quarter. The company has been under the control of the US government since September of last year.
Source: CNN
This is great news for all of us! Any and every improvement in the big players of our economy (especially in real estate) means that things are at least somewhat headed in the right direction. Unfortunately, it’s predicted that quite a few homeowners will still find themselves in the hole by 2011, when home values are set to increase.