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Freddie Mac earns $5 billion in second quarter

WASHINGTON (AP) — Freddie Mac earned $5 billion from April through March, the seventh straight profitable quarter for the mortgage giant.

The second-quarter gain reported Wednesday compares with net income of $3 billion in the same period of 2012. Freddie says their earnings were due largely to increased profits from investments made to hedge against rising interest rates. That helped offset losses on mortgages during the quarter.

Freddie will pay a dividend of $4.4 billion to the U.S. Treasury next month and is requesting no additional aid.

The government rescued Freddie and larger sibling Fannie Mae during the financial crisis in 2008. Together, they received loans of about $187 billion.

A housing recovery that began last year has made both profitable again. Combined, they have paid back roughly $136 billion of their government loans.

Once the second-quarter dividend is paid, Freddie will have repaid $41.4 billion of the roughly $71.3 billion it received from taxpayers.

Fannie and Freddie own or guarantee about half of all U.S. mortgages, worth about $5 trillion. Along with other federal agencies, they back roughly 90 percent of new mortgages.

Fannie and Freddie don’t directly make loans to borrowers. They buy mortgages from lenders, package them as bonds, guarantee them against default and sell them to investors. That helps make loans available and exert influence over the housing market.

On Tuesday, Obama proposed a broad overhaul of the U.S. mortgage finance system, including winding down Fannie and Freddie. He declared that taxpayers should never again be left “holding the bag” for the mortgage giants’ risky moves.

Obama wants to replace them with a system that would put the private sector, not the government, primarily at risk for the loans. The government would still be involved, both in oversight and as a last-resort loan guarantor. Obama also wants a guarantee that private lenders will make sure homeowners have access to 30-year fixed mortgages.

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