Freddie Says More Treasury Funds Unnecessary After $5Bn Loss

Mortgage giant Freddie Mac (FRE: 1.14 -1.72%) on late Friday posted a $5bn net loss in Q309 and $10.4bn net worth in Q309.

Unlike sister government-sponsored enterprise (GSE) Fannie Mae (FNM: 1.02 -0.97%), Freddie said it would not require additional Treasury Department funds through the senior preferred stock purchase agreement.

Freddie said it enabled more than 78,000 borrowers in Q309 to modify under the Administration’s Home Affordable Modification Program (HAMP), through which the Treasury allocates capped incentives to servicers that pursue modifications for at-risk borrowers.

Freddie purchased or guaranteed $125bn in mortgage loans and mortgage-related securities, including $91bn in single-family refinancing, during the period.

“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,” said CEO Charles Haldeman. “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 experienced $7.5bn of credit-related expenses including provision for credit losses and real estate-owned (REO) operations expense, compared with $5.2bn in Q209. The GSE increased its provision for credit losses to $7.6bn in Q309 from $5.2bn in Q209 on changed economic factors affecting borrower performance and delinquency trends. Freddie said it expects provisions for credit losses to remain high in Q409.

The company’s single-family guarantee portfolio continued to deteriorate in the quarter. The total single-family delinquency rate climbed to 3.33% as of September 30, from 2.78% at June 30 as foreclosure timelines increased and a high volume of seriously delinquent loans were kept in trial modification periods in HAMP.

Single-family net charge-offs rose to $2.2bn in Q309, from $1.9bn in Q209. Single-family non-performing assets — including REO properties and delinquent loans underlying Freddie’s structured securities — soared to $91.6bn at the end of the quarter, from $76.9bn as of June 30.

Income from Freddie’s REO operations came in at $96m, compared with the $9m expense seen in Q209. The GSE indicated lower disposition losses as well as recoveries of property write-downs due to the stabilization of REO fair values drove the quarterly income.

Write to Diana Golobay.