Freddie Mac reported net income of $577 million in the first quarter before it made a $1.8 billion dividend repayment to the Treasury Department.
The government-sponsored enterprise and one of the largest mortgage financiers in the country drew $19 million from the Treasury as part of its ongoing conservatorship bailout.
Net income for the quarter dropped from a $676 million gain one year ago because of higher derivative losses and lower net interest income.
Higher valuations of the mortgage bonds Freddie holds available for sale pushed total comprehensive income to $1.78 billion in the first quarter. The $1.8 billion repayment to the Treasury offset this total, forcing the remaining to be drawn from the government.
Freddie financed over $114 billion in mortgages during the first quarter, up from $105 billion one year ago.
Roughly 87% of its business was refinancing. More than 416,000 borrowers refinanced their Freddie-guaranteed home loan in the first three months of 2012, but the company said it is still too early to estimate how many will ultimately qualify for the expanded Home Affordable Refinance Program.
Freddie lowered its loan loss reserves to $38.3 billion in the first quarter from $39.3 billion last year. Its the lowest level since the middle of 2010.
Losses continue to come from mortgages guaranteed between 2005 and 2008. These vintages made up 88% of credit losses at the GSE during the first quarter.
Its entire single-family delinquency rate stood at 3.51% as of March 31, down 7 basis points from three months prior.
In February, the Federal Housing Finance Agency released a strategic plan to contract the GSEs and return some market share to private investors.
"Today, we are executing against that plan, working with our regulator to build a new infrastructure for the housing finance system and establish a path for shifting risk to private investors," said Freddie CEO Ed Haldeman, who will be stepping down soon. "These steps will ultimately reduce the size of the government's role in the market, and complement the work we've already started to streamline the company."
Still, Washington is not expected to propose a plan to end conservatorship and rebuild the secondary market until after the November elections.