Freddie Mac issued its second quarter report today, and it showed that the government controlled mortgage giant lost $4.7b in the last quarter and will be requesting an additional $1.8 billion of our money from the Treasury in order to make ends meet. This is a decrease from the previous quarter when Freddie lost $6.7 billion. Last week Fannie Mae requested $1.5 billion from the Treasury, bringing the total tab for bailing out Fannie Mae and Freddie Mac to just shy of $150 billion.
Fannie Mae and Freddie Mac were seized by the government in 2008 to ward off their financial collapse. Since that time there has been considerable debate about the future of Fannie and Freddie. Most agree that the current cash-hemorrhaging model is unsustainable, but nobody seems to quite know what shape reform should take.
Also in the Second Quarter 2010 Financial Results Supplement, we learn that Freddie Mac’s REO inventory is on a pace to nearly double from 2009 to 2010, which is pretty much the same as Fannie Mae. This dramatic increase in REO acquisitions goes to show just how much shadow inventory exists. This does not bode well for housing prices in the near future.
A few other interesting snippets from the Freddie Mac reports:
- The worst performing Freddie Mac loans are far and away those from 2005-2007. The graph on page 23 of the Supplement demonstrates this very clearly.
- 33 States showed home price declines from June 09 to June 10.
- Home prices are down an average of 17 percent nationally from June 2006-present.
- 143,000 trial and permanent HAMP modifications have occurred.
- The savings for the modified borrowers were $8,700 on average.
- Freddie purchased or guaranteed approximately 25 percent of every home loan in the second quarter.
There is a lot more information in the reports, and if it is the kind of thing that interests you, I recommend clicking through to see the full report.
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