Freddie Mac Posts $6.7 Billion Loss in Q1

Mortgage giant ""Freddie Mac"":http://www.freddiemac.com said Wednesday that it lost $6.7 billion during the first three months of this year, which follows a $6.5 billion loss for Q4 2009.
[IMAGE] After adding in dividend payments of $1.3 billion on its senior preferred stock to Treasury, the McLean, Virginia-based company reported a net loss attributable to common stockholders of $8.0 billion, or $2.45 per diluted common share, for the first quarter of 2010.

The quarterly results helped pushed the GSE's net worth to negative $10.5 billion at March 31, 2010, compared to a positive net worth of $4.4 billion at the end of last year.

With the GSE's finances severely in the red, the Federal Housing Finance Agency (FHFA), as conservator, plans to submit a request to the Treasury Department on Freddie's behalf for a draw of $10.6 billion in taxpayer funds.

Freddie Mac explained in its ""earnings announcement"":http://www.freddiemac.com/news/archives/investors/2010/2010er-1q10.html that the net worth deficit was largely the result of new accounting standards adopted on January 1, 2010, related to transfers of financial assets and consolidation of variable interest entities, which trimmed the GSE's total equity by $11.7 billion. Because of these changes in accounting principles, Freddie said its Q1 results are not directly comparable with the results of operations for prior periods.

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""Our first quarter 2010 financial results were driven significantly by the required adoption of new accounting standards, along with continued weakness in the housing market,"" said Ross J. Kari, Freddie Mac's CFO. ""Upon adoption of the new accounting standards we added $1.5 trillion of assets and liabilities to our balance sheet, and the cumulative effect of these changes was a one-time net decrease of $11.7 billion to total equity. The impact on Freddie Mac was significant relative to others as the nature of our business model amplified the impact of these changes.""

As ""DSNews.com previously reported,"":http://dsnews.comarticles/freddie-mac-reports-first-delinquency-decline-in-three-years-2010-05-04 Freddie Mac's total single-family delinquency rate was 4.13 percent at the end of March, down from 4.20 percent the month before. The percentage of overdue mortgage, though, was up compared to the end of 2009, when the delinquency rate registered 3.98 percent.

The GSE's single-family non-performing assets, including both delinquent loans and REO properties, increased to $115 billion as of March 31, 2010, compared to $103 billion at December 31, 2009. Freddie said this increase includes a high volume of loans subject to troubled debt restructuring accounting during the first quarter.

Total single-family net charge-offs increased to $2.8 billion in the first quarter of 2010, compared to $2.4 billion in the fourth quarter of 2009, primarily due to an increase in foreclosure transfers, the GSE said.

While Freddie's balance sheet continues to mirror the struggles of the housing industry, the company's CEO, Charles E. Haldeman, Jr., says he is seeing some signs of stabilization in the housing market, particularly in property values and home sales in key geographic areas.

Kari added that that new business being delivered to Freddie Mae is of ""notably high credit quality.""