Freddie Mac’s Portfolio Nearly Capped

September 25, 2007 No Comments »

Freddie Mac announced Tuesday that its mortgage holdings soared at the fastest rate since December 2005.

Freddie Mac’s mortgage retained portfolio grew by an annualized 19.3 percent in August to $732.3 billion, while the company’s mortgage holdings rose for a fourth straight month, marking annualized growth of 6 percent.

Much of its portfolio expansion in August was in its own mortgage-backed securities, while holdings in non-agency MBS declined.

Holdings of “agency” mortgage-related securities not guaranteed by Freddie Mac also rose.

Unfortunately, the current cap on Freddie’s portfolio only allows the company to grow by an additional $2.8 billion in September to the current max limit of $735 billion.

However, the Office of Federal Housing Enterprise Oversight said earlier this week that it would ease limits on the growth of the government-sponsored entity, possibly by as soon as February.

The portfolio caps were set at $727 billion, allowing Freddie Mac to grow marginally, though a new agreement announced last week pushed the caps to $735 billion.

Temporary portfolios caps were established last year because of financial reporting problems at both Fannie Mae and Freddie Mac, forcing each to restate earnings due to massive accounting mistakes.

Freddie Mac also announced that the single-family delinquency rate for all loans was 44 basis points in July, up slightly from 42 basis points in June.

Meanwhile, Fannie Mae, the largest provider of funding for U.S. home loans, said Tuesday that its mortgage investment portfolio shrank by $954 million in August to $728.9 billion.

The mortgage portfolio dipped at a 1.6 percent annual rate in August, though it has increased at a 0.9 percent rate this year.

Freddie Mac and Fannie Mae currently have loan portfolios worth a combined $1.4 trillion.

The two GSEs already own or guarantee 40% of the $10.9 trillion U.S. residential mortgage market, but have been lobbying for portfolio growth of at least 10%, despite disapproval by both the Bush Administration and Fed Chief Ben Bernanke.

Shares of Freddie Mac were largely unchanged in midday trading on Wall St.

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