Freddie Mac delinquencies up; portfolio shrinks

By Julie Haviv

NEW YORK (Reuters) - Freddie Mac's (FRE.N: Quote, Profile, Research, Stock Buzz) mortgage investment portfolio shrank for a second consecutive month in February while delinquencies rose to the highest in at least three years, the No. 2 U.S. home funding company said on Tuesday.

The government-sponsored enterprise said its portfolio shrank by an annualized 12.4 percent in February to $709.5 billion. The portfolio has contracted by an annualized rate of 9.4 percent year-to-date.

Policy-makers have been pressing Freddie Mac and rival housing finance company, Fannie Mae FMN.N, to buy more mortgages as a way to bring down lending rates which rose last month.

Both companies have been balancing demands for them to increase their investment portfolio with the need to preserve capital and protect shareholders as the country's housing crash drives mortgage late payments to record levels.

Mortgage delinquencies in Freddie Mac's investment portfolio rose to 0.71 percent in January versus 0.65 percent in December, the McLean, Virginia-based company said in a statement. The delinquency rate was the highest since it started using the current method of calculating delinquencies in about three years ago.

The delinquency rate in January was also sharply higher than a year-earlier when it stood at 0.25 percent in January 2007.

Freddie Mac's total mortgage portfolio, which combines its mortgage investment portfolio with mortgage securities sold by Freddie Mac, increased at an annualized rate of 8.4 percent year-to-date and 12.0 percent in February to $2.132 trillion.

Fannie Mae, the largest provider of funding for U.S. home mortgages, said on Monday delinquencies on its single-family home financing business rose in January to 1.06 percent, the highest since at least 1997. The rate increased from 0.98 percent in December.