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Investments

Freddie Mac cuts MBS purchases in half

Dropping delinquency rate shrinks portfolio of bad loans

cut money

Freddie Mac cut its purchases of mortgage-backed securities by more than half in September, falling in line with the government’s goal of reducing its global footprint in the secondary mortgage market.

The unpaid principal balance of the agency’s mortgage-related investment portfolio decreased by approximately $14.1 billion in September.

The mortgage giant purchased $8.8 billion of MBS in September, a significant drop from $17.8 billion in August, according to Freddie Mac’s monthly volume summary report.

Total mortgage purchases and issuances at Freddie Mac reached $28.2 billion in September while the enterprise also liquidated $31.8 billion of loans, causing its mortgage portfolio to decrease at an annualized rate of 4.3%.

Royal Bank of Scotland (RBS) offered a couple of reasons for the shrinking MBS portfolio.

"Perhaps Freddie did not purchase as much as they used to in their cash-window transactions," explained RBS analysts Sarah Hu.

She added, "As the delinquency rate went down, there was a shrinking portfolio of bad loans to be bought out of pools."

Single-family refinance-loan purchase and guarantee volumes reached $16.4 billion in September, representing 62% of the government-sponsored enterprise’s total mortgage portfolio purchase of issuances.

Additionally, relief refinance mortgages comprised approximately 39% of the GSE’s total refinance volume during the month based on unpaid principal balance, up from August.

Freddie Mac modified 6,685 loans in September and 60,431 in the first nine months of the year.

Meanwhile, multifamily new business volume was $1 billion in September and $18.8 billion since Sept. 30, 2013.

Mortgage-related securities and other guarantee commitments decreased at an annualized rate of 0.2% in September.

Seriously delinquent single-family mortgages shrunk from 2.64% in August to 2.58% in September. Additionally, the multifamily delinquency rate remained flat at 0.05%.

The measure of the GSE’s exposure in the portfolio market value averaged $277 million in September, Freddie added.

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