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Freddie Mac Mortgage Refinance Purchases Swell 41%

The volume of refinance loans bought by mortgage giant Freddie Mac (FRE) continued to grow in December, swelling 41% from the previous month to $27.3bn. In November, Freddie bought $19.3bn of refinance loans, a 7% gain from October. Freddie's total mortgage portfolio grew at an annualized rate of 5.7% in the month, according to a monthly summary. At the same time, the aggregate unpaid principal balance of the mortgage-related investments portfolio slid to $755.3bn, from $761.8bn at the end of November. Purchases and issuance totaled $44bn in December, bringing the full-year 2009 total to $548.37bn. The delinquency rate in Freddie's single-family portfolio grew 15 bps to 3.87%, while the multifamily delinquency rate was virtually flat at 0.15% in December. A year earlier, the single-family portfolio was 1.72% delinquent, while the multifamily portfolio was 0.03% delinquent. Freddie's guaranteed participation certificates and structured securities issued increased at an annualized rate of 5.9% in December. Issuance for the month included $4.4bn of guarantees under the Housing Finance Agencies (HFA) initiative, in which the Treasury Department bears initial losses on these securities up to 35% of the program-wide issuance. Freddie in October 2009 agreed with the Treasury and sister mortgage giant Fannie Mae (FNM) to provide assistance to state and local HFAs. Freddie said it has $7.36bn in additional outstanding commitments under the initiative, which settles this month. The Administration's HFA initiative aims to encourage low mortgage rates and expand resources for low- and middle-income borrowers to purchase or rent affordable housing. Under the the New Issue Bond Program (NIBP) branch of the program, HFAs receive temporary financing to issue new mortgage revenue bonds. The Treasury purchases Fannie and Freddie securities backed by these bonds. Under the Temporary Credit and Liquidity Program (TCLP) Fannie and Freddie provide replacement credit and liquidity facilities available to HFAs to reduce the costs of maintaining existing HFA financing. The program aims to relieve financial strains on the HFAs, and the Treasury provides “backstop” to the facilities by purchasing an interest in them. Write to Diana Golobay. Disclosure: The author holds no relevant investment positions.

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