Freddie May be in More Trouble

Calculated Risk graphs the increasingly worrisome delinquency rate at Freddie Mac (NYSE:FRE), now up to 3.33% of its book of business from 3.13% in August, and from 1.22% in September 2008.  Freddie Mac (NYSE:FRE) is currently trading down close to -3% to $1.33 a share, which is still substantially better than the 52-week low of just 35 cents per share.

Freddie Mac (NYSE:FRE), the second-largest U.S. home funding company, said on Friday its mortgage investment portfolio grew by an annualized 7.3 percent rate in September, while delinquencies on loans it guarantees accelerated.

The portfolio increased to $784.2 billion, for an annualized 3.4 percent decrease year to date, the McLean, Virginia-based company said in its monthly volume summary.

The portfolio size increased on a year-over-year basis. In September 2008, the portfolio was $736.9 billion.

Freddie Mac in early August reported a surprising profit in the second quarter and indicated that it may not need additional federal aid, at least for now.

Delinquencies, which increase stress on the company's capital, jumped to 3.33 percent of its book of business in September from 3.13 percent in August and 1.22 percent in September 2008.

The multifamily delinquency rate accelerated slightly in September to 0.11 percent from 0.10 percent in August. A year earlier it was 0.01 percent.

Freddie Mac said refinance-loan purchase volume was $21.4 billion in September, down from August's $35.6 billion.

Activity peaked earlier this year, with March's $52 billion its largest refinance month since 2003.

The net amount of mortgage-related investments portfolio mortgage purchase agreements entered into during the month of September totaled $4.6 billion, down from the $12.1 billion entered into during the month of August.

The company's total mortgage portfolio increased at a 0.8 percent annualized rate in September to $2.243 trillion, for an annualized 2.1 percent increase year to date.

In early September 2008, the U.S. government seized control of Freddie Mac and its larger sibling, Fannie Mae (FNM.P) (FNM.N), amid heightened worries about shrinking capital at the congressionally chartered companies.

The current agreement with the U.S. Treasury has the retained portfolio at Fannie Mae and Freddie Mac capped at $900 billion until Dec. 31, when they are to start declining by 10 percent per year until they reach $250 billion.

The government has been relying heavily on Fannie Mae and Freddie Mac in its efforts to stimulate the battered U.S. housing market by buying more mortgage loans, easing refinancing and helping homeowners avoid foreclosure.

After the worst downturn since the Great Depression, the housing market has shown signs of stabilization. Home price declines have moderated in many regions of the country and, according to some indexes, prices in some regions have risen.

Source: http://www.reuters.com/article/BROKER/idUSN2549344620091023

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