Freddie Losses Driven by Credit Issues

Freddie Mac had credit-related expenses of $7.5 billion for the third quarter, which was the leading driver of its $6.3 billion net loss to common stockholders. Without a $1.3 billion dividend payment to the U.S. Treasury, the loss would have been $5 billion. During the quarter, Freddie Mac had further deterioration in its single-family guarantee portfolio. The delinquency rate went from 2.78% at the end of the second quarter to 3.33% at the end of the third quarter. The company blamed the increase on weak economic conditions and, in part, to extended foreclosure timelines and to a high volume of seriously delinquent loans that are remaining in trial periods under the Home Affordable Modification Program that might have otherwise completed modification or proceeded to foreclosure. Single-family net charge-offs increased to $2.2 billion in the third quarter of 2009, compared with $1.9 billion in the second quarter of 2009, while nonperforming assets increased to $91.6 billion from $76.9 billion during the same period. Freddie Mac had positive net worth of $10.4 billion at Sept. 30. As a result of the positive net worth, no additional funding from Treasury was required for the third quarter. The positive net worth reflects an $8.5 billion gain in accumulated other comprehensive income primarily driven by improved values on the company's available-for-sale securities.