Tax reform drives Freddie Mac’s Q4 net loss

Due to Freddie Mac’s net worth deficit, the FHFA will submit a draw request to Treasury for $312 million

Tax reform drives Freddie Mac’s Q4 net loss

Freddie Mac has reported a $2.92 billion net loss for the fourth quarter, primarily as a result of a $5.4 billion write-down of the net deferred tax asset due to the impact of the recent tax-reform legislation.

The company’s fourth-quarter net loss decreased $7.92 billion from the third quarter. The comprehensive loss for the quarter was $3.31 billion, a $7.96 billion decrease from the previous quarter. Third-quarter results included a $4.5 billion, or $2.9 billion after-tax, litigation settlement.

Excluding the write-down, Freddie Mac said its results continue to reflect business fundamentals, with fourth-quarter comprehensive income at $2.1 billion, an increase of approximately $0.3 billion from the $1.8 billion comprehensive income, excluding the litigation settlement, in the third quarter.

For the full-year 2017, the company’s recorded net income of $5.63 billion and comprehensive income of $5.56 billion, down $2.19 billion and $1.56 billion, respectively, from the full-year 2016. Excluding significant items, the company’s 2017 comprehensive income was $8.1 billion, an increase of approximately $1.0 billion from the full-year 2016, reflecting strong business fundamentals.

Freddie Mac said that based on its $312 million net worth deficit at Dec. 31, the Federal Housing Finance Agency will submit a draw request to Treasury for $312 million.

CEO Donald Layton said the company reached several milestones in 2017, which he called a landmark year in the company’s transformation.

“The guarantee book topped $2 trillion for the first time after growing 6% last year, the highest rate in a decade,” Layton said. “Our work to innovate and reimagine the mortgage experience – and almost all business activities – has helped increase our competitiveness and made home possible for 2.3 million home buying and renting families in 2017. Notably, the number of first-time homebuyers we funded hit a 10-year high, and we were once again the nation’s top multifamily financier. At the same time, we significantly lowered taxpayer exposure to our risks, having reduced impaired assets in the investment portfolio by nearly 30% through cost-effective transactions, while integrating credit risk transfer extensively across both guarantee businesses.”

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