Freddie Mac announced this morning that it will not require
any infusion of cash from the U.S. Treasury following its profitable second
quarter operations. The company will also
pay $1.8 billion to the Treasury as a dividend on the 10% senior preferred
stock the department holds.
During fiscal 2012 to date Freddie Mac has paid $3.6 billion
in dividends while drawing $0.02 billion in financial support from the
government. In FY2011 it paid $6.5
billion and drew $7.6 billion. Since it
was placed in federal conservatorship in August 2008 the net draw has been
$52.2 billion.
The government sponsored enterprise (GSE) reported net
interest income during the quarter was $4.4 billion, a $0.1 billion decrease
from Q1. However provisions for credit
losses decreased from $1.8 billion to $0.2 billion and derivative losses from
$1.1 billion to $0.9 billion.
Non-interest income rose from an $(0.4) billion loss to $0.1
billion. This resulted in net income for
the second quarter of $3.0 billion compared to $577 million one year earlier
and comprehensive income of $2.9 billion compared to $1.8 billion. Freddie Mac had a net worth of $1.1 billion at
June 30, 2012.
During the first half of 2012 the company has assisted in
781,000 refinancing transactions and 143,000 purchases of homes. It has also participated in financing 193,000
multi-family housing units. The company
provided $215 billion in market liquidity so far this year, $163 billion of
which was for refinancing. Since 2009
the company has purchased about $1.1 trillion in refinance mortgages which it
estimates have saved 5.2 million households approximately $2,500 per year in
interest payments.
Foreclosure prevention efforts by Freddie Mac have reached 81,000
families thus far in 2012 and 697,000 since the beginning of
conservatorship. The cumulative totals
break down into 373,000 loan modifications, 117,000 repayment plans, 78,000
forbearance agreements, and 129 short sales or deeds in lieu. As can be seen in the chart below, these loan
mitigation efforts have, from the beginning been slightly more successful than
the 50 percent generally expected from such programs. The success rate has grown fairly steadily
with each quarter.
Harp 2.0 refinancing through Freddie Mac has reached over
200,000 borrowers this year. This is
over one-quarter of the total number of HARP refinancings since the program
began in 2009.
Freddie Mac said it has continued to improve the credit
quality of its portfolio. The average
weighted loan to value (LTV) ratio of loans purchased in the second quarter for
its Credit Guarantee Portfolio was 66 percent compared to 72 percent in the
2005-2008 period. The average weighted
credit score was 762 compared to 723 during the housing boom.
The single family delinquency rate was 3.45 percent at the
end of the quarter, down from 3.51 percent at the end of the first
quarter. The Mortgage Bankers
Association reports that nationally the serious delinquency rate was 7.44
percent at the end of March 2012, so the Freddie Mac rate is well below
national norms. The delinquency rate on
multi-family loans was 0.27 percent, up slightly from the Q1 figure of 0.23
percent but again, according to the company, lower than industry benchmarks.
As noted above, provisions for credit losses shrunk from
$1.8 billion in the first quarter of 2012 to $0.2 billion in the current
quarter. The company now has loan loss
reserves of $35.8 billion compared to $38.3 billion at the end of Q1.
