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Freddie Mac's Losses Narrow in Q409

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Freddie Mac (FRE) posted a loss of $7.8bn, or $2.39 per share, in Q409, bringing the government-sponsored enterprise’s (GSE) total loss in 2009 to $25.7bn. But Freddie said its net worth as of December 31, 2009 was $4.4bn, and no additional funding was required from the Treasury Department under the terms of the purchase agreement for the fourth quarter. The Q409 loss includes a $1.3bn dividend payment to the Treasury on the senior preferred stock it holds. Net interest income for the quarter was $4.5bn, but results were also impacted by a $3.4bn write-down of the carrying value of the company’s Low-Income Housing Tax Credit (LIHTC) investments and $7.1bn in credit-related expenses. “We start 2010 with some early signs of stabilization in the housing market, with house prices and home sales likely nearing the bottom sometime in 2010. We expect that low mortgage rates, relatively high affordability and the homebuyer tax credit will help continue to fuel the recovery,” said Freddie Mac CEO Charles Haldeman, Jr. In Q309 Freddie Mac lost $6.7bn, or $2.06 per share. In Q408, Freddie lost $23.9bn, capping off 2008’s total loss of $50.1bn, or $34.60 per share. “Still, the housing recovery remains fragile, with significant downside risk posed by high unemployment and a potential large wave of foreclosures. That's why our commitment to help struggling homeowners is steadfast — and we will continue working to find ways to keep families in their homes through both our own programs and the Obama Administration's Making Home Affordable Program,” Haldeman added. At the end of 2009, Freddie said it helped 272,000 borrowers either stay in their homes or sell their properties through the company’s foreclosure avoidance programs and the Making Home Affordable Modification Program (HAMP). At year’s end, Freddie had 129,380 loans currently in HAMP workout plan trial periods. Freddie also was involved in the refinancing of $379bn of single-family loans, creating an estimated $4.5bn in annual interest savings for borrowers, including 169,000 borrowers participating in the Freddie Mac Relief Refinance Mortgage program. Freddie’s real estate owned (REO) operations lost $88m in Q409 , compared to income of $96m in Q309, due to lower recoveries of property write-downs in the fourth quarter compared to the third quarter. REO operations lost $307m for full-year 2009, compared to a $1.1bn loss in 2008. Freddie attributed the smaller loss to stabilizing home prices in 2009, as opposed to 2008, which was marked with a sharp decline in prices. Write to Austin Kilgore. The author held no relevant investments.

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