Freddie Mac will pay U.S. $746M on quarterly profit

(Bloomberg) — Freddie Mac, the U.S.-owned mortgage financier, will send $746 million to the Treasury Department next month after reporting first-quarter net income of $524 million.

The new payment by McLean, Va.-based Freddie Mac, which has been under conservatorship since 2008, will bring total returns to $92.6 billion, according to a regulatory filing Tuesday, far beyond what the company received in federal aid to stay afloat during the credit crisis.

The company again avoided a quarterly loss even while suffering sizable expenses from derivatives — totaling $2.4 billion in the period that ended March 31 — that under generally accepted accounting principles aren't offset by gains on the assets being hedged. Losses in any period that reduce its net worth, which is steadily declining under its bailout agreement, below zero would require the company to take more U.S. funds, potentially drawing unwanted attention from policy makers.

"We continue to be profitable on a GAAP basis despite the noise, and the underlying economics are even better than the GAAP accounting numbers," Donald H. Layton, the company's chief executive officer, said on a conference call with reporters. ''We had what we consider a very good quarter.''

Freddie Mac and larger rival Fannie Mae are required to pay Treasury all profits above a minimum net worth under terms established after they were seized by regulators amid losses that pushed them to the brink of collapse. The money counts as a return on the U.S. investment and not as repayment, leaving no existing mechanism for them to exit government control.

CEO's Pay

In its filing, Freddie Mac also said that the company's regulator had informed its board that they could propose adjusting Layton's pay, which totaled $600,000 last year.

The CEO said on the call that while his company is seeking to manage its business based on what will be most profitable over the long term, its desire to avoid tapping further aid from the Treasury because of accounting quirks may eventually cause it to adjust that approach.

"We might actually begin to do things that would be GAAP-orientated rather than economically oriented," he said. "We study that constantly, but we have not gotten there yet."