Freddie Mac Aug portfolio down, delinquencies jump

NEW YORK (Reuters) - Freddie Mac FRE.P FRE.N, the second-largest U.S. home funding company, on Friday said its mortgage investment portfolio shrank by an annualized 29.5 percent rate in August, while delinquencies on loans it guarantees accelerated.

The portfolio fell to $779.4 billion, for an annualized 4.7 percent drop year to date, the McLean, Virginia-based company said in its monthly volume summary.

The portfolio size, however, increased on a year-over-year basis. In August 2008, the portfolio was $760.9 billion.

Freddie Mac in early August reported a surprising profit in the second quarter and indicated that it may not need additional federal aid, at least for now.

Delinquencies, which increase stress on the company's capital, jumped to 3.13 percent of its book of business from 2.95 percent in July and 1.11 percent in August 2008.

The multifamily delinquency rate, however, slowed slightly in August to 0.10 percent from 0.11 percent in July. A year earlier it was 0.02 percent.

Freddie Mac said refinance-loan purchase volume was $35.6 billion in August, up from July's $34.1 billion.

Activity peaked earlier this year, with March's $52 billion its largest refinance month since 2003.

The net amount of mortgage-related investments portfolio mortgage purchase agreements entered into in August totaled $12.1 billion, up from $11.0 billion in July.

The company's total mortgage portfolio increased at a 3.7 percent annualized rate in August to $2.241 trillion, for an annualized 2.3 percent increase year to date.

In early September 2008, the U.S. government seized control of Freddie Mac and its larger sibling, Fannie Mae FNM.P FNM.N, amid heightened worries about shrinking capital at the congressionally chartered companies.

The current agreement with the U.S. Treasury has the retained portfolio at Fannie Mae and Freddie Mac capped at $900 billion until December 31, when they are to start declining by 10 percent per year until they reach $250 billion.

The government has been relying heavily on Fannie Mae and Freddie Mac in its efforts to stimulate the battered U.S. housing market by buying more mortgage loans, easing refinancing and helping homeowners avoid foreclosure.

After the worst downturn since the Great Depression, the housing market has shown signs of stabilization. Home price declines have moderated in many regions of the country and, according to some indexes, prices in some regions have risen.

(Reporting by Julie Haviv; Editing by James Dalgleish)