Freddie Mac Portfolio Expands as Delinquencies Climb

January 24, 2008 No Comments »

Freddie Mac, the smaller of the two government-sponsored entities, said the principal balance of its retained portfolio increased to $718.1 billion at the end of 2007, up from $701 billion in November, to the highest level since August.

The company’s portfolio increased at an annualized rate of 28.6 percent in December, the fastest rate in two years, and the first increase in four months.

The McLean, Virginia-based mortgage financier said its portfolio rose at a 2.4 percent annual rate in 2007, limited by constraints set forth by its regulator and recent capital concerns.

Much of the increase was related to purchases in Freddie’s own mortgage securities, known as participation certificates, while holdings of non-agency securities were reduced.

Its total mortgage portfolio increased at an annualized rate of 15.1 percent to $2.10 trillion in 2007, up from $1.8 trillion in 2006, while nearly doubling its growth rate.

The rate of delinquencies on single-family loans guaranteed by Freddie Mac increased to 0.6 percent in November, up from 0.42 percent in December 2006, the highest rate since February 2006.

Freddie Mac said its mortgage bond guaranty business grew at a 23.1 percent rate in 2007, compared with 15.2 percent in 2006, as more lenders turned to the GSEs to sell loans.

But the company warned that “the fair value of our net assets attributable to common stockholders has declined significantly due to the wider spreads on mortgage products.”

In a recent research note, Credit Suisse analysts warned that Freddie Mac could write down as much as $8 to $11 billion when it announces fourth-quarter earnings.

Shares of Freddie Mac ended the day down 52 cents, or 1.60%, to $32, significantly lower than their 52-week high of $68.12.

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