Freddie Mac Requests $100M in Taxpayer Support after Q3 Loss
By: Carrie Bay
Freddie Mac said Wednesday that it lost $2.5 billion during the third quarter of this year. Add to that the $1.6 billion dividend payment the GSE had to make to Treasury on stock the company relinquished in exchange
for bailout money, and Freddie Mac reported a net loss attributable to common stockholders of $4.1 billion, or $1.25 per common share, for the quarter.
The third-quarter results actually represent an improvement from the previous three-month period, when the GSE reported a net loss attributable to common stockholders of $6.0 billion, or $1.85 per common share.
Freddie Mac had a net worth deficit of $58 million at September 30, 2010, that company officials attributed to the quarterly dividend payment to Treasury of $1.6 billion, which exceeded the GSE’s total comprehensive income of $1.4 billion.
To cover the deficit, the company is asking Treasury for a draw of $100 million in taxpayer dollars. Since Freddie Mac was placed under government control in September 2008, it has needed $64.2 billion to stay afloat.
There was a bright spot in Freddie’s earnings report – delinquencies are declining and the credit quality of new loans is improving.
The GSE’s single-family serious delinquency rate was 3.80 percent at the end of September, down from 3.96 percent at June 30, 2010, and below industry benchmarks, according to company officials.
Charles E. Haldeman, Jr., Freddie Mac’s CEO, said, “The actions we have taken together with our mortgage lenders to continue to build a strong foundation of responsible lending practices are working.”
He explained that the GSE’s the 2009 and 2010 books of business are the strongest since 2003, as measured by loan-to-value (LTV) ratios and FICO scores.
“These changes are good for borrowers, Freddie Mac, and the entire housing market,” Haldeman said. “While we continue to work through credit problems in our 2005 through 2008 books of business, we remain encouraged by the slowing trend of delinquent loan additions in recent periods.”
Freddie Mac said in its earnings report that it has helped more than 210,000 borrowers avoid foreclosure, including approximately 63,000 during the third quarter.
Total non-performing assets were $121.0 billion, or 6.1 percent of the total mortgage portfolio. The company explained that foreclosure activity for non-performing loans continued to increase during the third quarter as many of those loans transitioned to REO.
The GSE repossessed 39,053 homes during the quarter. As of the end of September, Freddie’s REO inventory stood at 74,897 units.
In its quarterly regulatory filing, Freddie Mac warned that the company will face increased expenses related to deficiencies in its servicers’ foreclosure procedures and the costs of curing them, which “may be significant.”
The company estimated it purchased or guaranteed one out of every four home loans originated in the first nine months of 2010. Since the beginning of 2010, Freddie Mac says it has made it possible for 1.2 million American families to take advantage of historically low interest rates to buy or refinance a home.
“As we near the end of 2010, the housing market remains fragile, and has recently come under renewed pressure from slowing economic growth, weaker employment, and foreclosure uncertainties,” Haldeman said. “We believe that it will be a considerable time until the housing market has a sustained recovery.”
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