Freddie Mac Reports $7.8B Loss for Q4

""Freddie Mac reported Wednesday"":http://www.freddiemac.com/news/archives/investors/2010/2009er-4q09.html that it lost $7.8 billion, or $2.39 per diluted common share, in the fourth quarter of 2009. The three-month results pushed the GSE's full year net loss to $25.7 billion, or $7.89 per diluted common share.

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It's a smaller deficit, though, when compared to the previous year's numbers. Freddie posted a $23.9 billion loss in the fourth quarter of 2008, and $50.1 billion for all of 2008.

For the third consecutive quarter, the mortgage financier said it doesn't need any additional capital from the Treasury to continue operating. Freddie Mac's net worth at December 31, 2009 was $4.4 billion, compared to a net worth deficit of $30.6 billion at December 31, 2008. With this figure now on the positive side, Freddie said no additional taxpayer dollars are required at this time.

But Freddie Mac officials signaled that might change soon, noting that once the effects of new industry-wide accounting rules for securitizations are realized, it will likely warrant a request to the Treasury for more funding, possibly as early as next month.

The GSE's chief executive also warned that conditions could worsen with a ""potential large wave of foreclosures"" still expected.

Charles E. Haldeman, Jr., Freddie Mac’s CEO, said, the housing recovery remains fragile, with significant downside risk posed by high unemployment and elevated delinquency rates.

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Freddie Mac said in its financial report that during the fourth quarter and full-year 2009, the company experienced further deterioration in its single-family guarantee portfolio. Loans 90 days or more past due hit 3.87 percent at the end of the fourth quarter, compared to 3.33 percent at the end of the third, and 1.72 percent at the end of 2008.

Freddie said the increase was due in part to a slowing of the foreclosure process, as a result of the Home Affordable Modification Program (HAMP) and other loss mitigation programs, as well as extended statutory foreclosure timelines in many states and servicer capacity constraints.

Single-family net charge-offs increased to $2.4 billion in the fourth quarter of 2009, compared to $2.2 billion in the third quarter of 2009. Single-family net charge-offs were $7.6 billion for the full-year 2009, compared to $2.7 billion for the full-year 2008.

The GSE’s REO business lost $88 million in the fourth quarter of 2009, compared to income of $96 million for the third quarter of 2009. Freddie said it reflected lower recoveries of property write-downs in the fourth quarter compared to the third. REO operations posted a $307 million loss for all of 2009, compared to $1.1 billion loss in 2008. Freddie Mac said the smaller loss was because of stabilization in home prices during 2009, compared to the sharp price declines that characterized 2008.

According to Haldeman, Freddie Mac purchased one out of every four home loans originated last year, helped approximately 1.8 million borrowers lower their mortgage payments, and more than a quarter million families avoid foreclosure.

Although he cautions that another surge of foreclosures threatens, Haldeman said, ""We start 2010 with some early signs of stabilization in the housing market, with house prices and home sales likely nearing the bottom sometime in 2010. We expect that low mortgage rates, relatively high affordability and the homebuyer tax credit will help continue to fuel the recovery.”