The government rescued Fannie and Freddie at the height of the crisis in September 2008 when both veered toward collapse under the weight of losses on risky mortgages. Together the companies received taxpayer aid totaling $187 billion.
The gradual recovery of the housing market has made Fannie and Freddie profitable again. Their repayments of the government loans helped make last year's federal budget deficit the smallest in five years.
U.S. home prices have risen steadily since housing began to recover in 2012. But home prices remain about 17 percent below the peaks reached in the summer of 2006, just before the housing market bust.
And while sales of existing homes have picked up, new home sales plummeted in June. New home construction has fallen for two straight months. That could lead to fewer construction jobs.
Fannie's $3.7 billion earnings in the second quarter were down 63 percent from $10.1 billion in the same period of 2013. Increases in home prices slowed sharply in the April-June period from a year earlier, reducing Fannie's income, the company said.
Freddie's $1.4 billion net income declined 72 percent from $5 billion in the second quarter of 2013. Freddie noted that its earnings can fluctuate widely due to changes in the value of its holdings of derivatives, investments used to hedge against swings in interest rates. That can create "mismatches" in quarterly earnings that may not reflect the economics of its business, Freddie said.
Freddie also said its level of earnings in recent quarters "is not sustainable over the long term."
Under a federal policy, Fannie and Freddie must turn over their entire net worth above $2.4 billion in each quarter to the Treasury. Fannie and Freddie said their net worth in the first quarter was $6.1 billion and $4.3 billion, respectively.
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.
The two companies 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.
President Barack Obama has proposed a broad overhaul of the U.S. mortgage finance system — including winding down Fannie and Freddie. The goal is to replace them with a system that would put the private sector, not the government, primarily at risk for the loans.
A plan to phase out Fannie and Freddie, and instead use mainly private insurers to backstop home loans is stalled in Congress. Two key senators reached agreement in March on a plan that was endorsed by the White House. The senators' plan would create a new government insurance fund. Investors would pay fees in exchange for insurance on mortgage securities they buy. The government would become a last-resort loan guarantor.