Home/Mortgages/Freddie Mac Posts $2.1 Billion Loss in Second Quarter

August 15, 2011 (Shirley Allen)

Government Sponsored Enterprise (GSE) Freddie Mac reports that it posted a net loss of $2.1 billion in the second quarter of 2011, compared to a net profit of $676 million in the first quarter of 2011. The second quarter results were still significantly less than the same quarter in 2010 when the GSE lost $4.7 billion.

The mortgage giant also stated in its Second Quarter Results report that it was making a $1.6 billion dividend payment to the Treasury Department, as a consequence, Freddie Mac’s net worth deficit was $1.5 billion as of June 30, 2011, prompting the Acting Director of the Federal Housing Finance Agency (FHFA) to submit a request for $1.5 billion in funds to the Treasury Department to eliminate the mortgage giant’s net worth deficit.

FHFA oversees the operation of Freddie Mac since the company was taken over by the government in September of 2008 after massive loses threatened to topple the company when the housing market collapsed.

The latest request for funds puts the total cost to taxpayers for Freddie Mac alone at $66.2 billion.

Despite significant losses in its portfolio, Freddie Mac reports that credit quality of single-family loans acquired after 2008 has been strong as measured by original loan-to-value (LTV) ratios, FICO scores, and the proportion of loans underwritten with fully documented income and expects better performance from its portfolio in the future.

As of June 30, 2011, approximately 46 percent of the company’s single-family guarantee portfolio of mortgage loans was originated after 2008.

Freddie Mac’s single-family serious delinquency rate dropped to 3.5 percent at the end of the second quarter, down from 3.63 percent at the end of the first quarter of 2011.

The mortgage giant was also able to help 53,777 borrowers avoid foreclosure in the second quarter which included 31,049 loan modifications, 7,981 repayment plans, 3,709 forbearance agreements, and 11,038 short sales and Deed-in-lieu transactions.

“Freddie Mac again played a leading role in the housing finance system and the U.S. economy, providing nearly $180 billion in needed liquidity to the market in the first half of 2011 while helping over 116,000 families avoid foreclosure,” said Freddie Mac Chief Executive Officer Charles E. Haldeman Jr. shedding some positive light on an otherwise dreary quarter-over-quarter loss. “We also continued to make progress in our efforts to strengthen the company and build value for the mortgage industry. One of our biggest priorities has been implementing the Servicing Alignment Initiative, an essential and joint effort with Fannie Mae that will improve the industry’s ability to help borrowers facing foreclosures.”

Tags: Freddie Mac, Second Quarter Results, FHFA, mortgage market, loan modifications, mortgage giant, GSE, single-family mortgages

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