Freddie Posts $5B Loss

Freddie Mac has reported a net loss of $5 billion for the third quarter, compared to net income of $768 million for the second quarter.

Unlike Fannie Mae, which announced an $18.9 billion net loss during the same time frame and requested a $15 billion injection from the Treasury, Freddie Mac says it will not be requesting additional federal aid, yet.

‘We continued to see some positive housing market developments, including higher volumes of home sales and modest increases in house prices in certain areas of the country," says CEO Charles E. Haldeman Jr. "However, we believe that factors like high unemployment, excess inventory and rising foreclosures will continue to impede a full recovery for some time and put further downward pressure on house prices. We expect to request additional funds from Treasury as this prolonged deterioration of market conditions continues to negatively impact our financial results."

Freddie Mac's third-quarter results were driven primarily by $7.5 billion in credit-related expenses, which consist of provisions for credit losses and real estate owned (REO) operations expense.

During the third quarter, the company saw further deterioration in its single-family guarantee portfolio, with its total single-family delinquency rate, excluding structured transactions, at 3.33% at the end of September. At the end of the second quarter, the total single-family delinquency rate was 2.78%.

Single-family nonperforming assets, including REO properties and delinquent loans underlying the company's issued PCs and structured securities, increased to $91.6 billion as of Sept. 30, compared to $76.9 billion as of June 30.

REO operations income for the third quarter was $96 million, compared to an expense of $9 million for the second quarter. The income for the third quarter was driven by lower disposition losses, as well as recoveries of property write-downs due to the stabilization of REO fair values during the quarter.

Losses on loans purchased for the third quarter of 2009 totaled $531 million, compared to $1.2 billion for the second quarter. The decrease was due to a significant reduction in the purchase volume of delinquent and modified loans, as the volume of seriously delinquent loans entering the Home Affordable Modification Program (HAMP) trial period increased during the third quarter.

A loan that has begun the trial period under HAMP will not be modified and purchased out of the PC pool until the borrower successfully completes the payment and documentation requirements of the trial period.

SOURCE: Freddie Mac


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