Freddie Mac Improves Earnings in 4Q, Seeks ‘Only’ $146M

Taxpayer-subsidized Freddie Mac reported a net income of $619 million for the fourth quarter 2011, compared to a net loss of $4.4 billion in the previous quarter.
But Freddie Mac’s recorded a net worth deficit of $146 million on Dec. 31, 2011, resulting from the $1.7 billion quarterly dividend payment to the U.S. Treasury on the company’s senior preferred stock.
To eliminate this deficit, Freddie’s regulator and conservator, the Federal Housing Finance Agency (FHFA), will submit a $146 million draw request to the Treasury.
For full-year 2011, the company reported a net loss of $5.3 billion, compared to a net loss of $14 billion for the full-year 2010.
Freddie has drawn a total of $72.3 billion as of March 31, 2012 from the Treasury.
Freddie improved its earnings because of a decline in borrowers refinancing into lower interest loans. Many homeowners cannot qualify for today’s historically low interest rates.
Freddie said it also has decreased its provisions for credit losses related to single-family loans, reflecting improved loan delinquency rates.
The single-family serious delinquency rate was 3.58 percent as of Dec. 31, 2011, compared to 3.51 percent and 3.84 percent as of Sept. 30, 2011 and Dec. 31, 2010, respectively.
By comparison, the serious delinquency rate on first-lien single-family loans in the overall U.S. mortgage market was 7.73 percent as of Dec.31, 2011.
Freddie and its bigger mortgage financing “sibling” Fannie Mae have drawn more than $170 billion from the Treasury, the costliest taxpayer bailout of the 2008 financial crisis – and the Treasury’s credit line remains open for both entities.
The government took over Fannie and Freddie in September 2008 as the two companies were on the verge of collapse due to their vast holdings of risky mortgages.
Freddie and Fannie own or guarantee about half of all U.S. mortgages, worth more than $5 trillion. The pair along with other federal agencies backed nearly 90 percent of new mortgages over the past year.
Last year, Freddie Mac provided more than $360 billion of liquidity to the mortgage market, enabling nearly two million American families to buy or rent a home, including 1.2 million homeowners who were able to refinance their mortgages and save approximately $2,300 in annual interest payments.
Freddie said it helped more than 208,000 borrowers avoid foreclosure. It sold more than two-thirds of its REO (bank-owned real estate) properties to owner-occupants.
“Freddie Mac believes that the credit quality of the single family loans the company has acquired after 2008 is strong, as measured by early delinquency rate trends, original LTV ratios, FICO scores, and the proportion of loans underwritten with fully documented income,” Freddie Mac said in a statement.

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