Freddie Mac Releases Third Quarter 2009 Financial Results

MCLEAN, Va., Nov. 6 /PRNewswire-FirstCall/ --

Summary
-- Third quarter 2009 net loss was $5.0 billion. After the dividend
payment of $1.3 billion to the U.S. Department of the Treasury on the
senior preferred stock, net loss attributable to common stockholders
was
$6.3 billion, or $1.94 per diluted common share, for the quarter.
-- Net worth at September 30, 2009 was $10.4 billion. The positive net
worth reflects an $8.5 billion gain in AOCI primarily driven by
improved
values on the company's available-for-sale securities. As a result of
the positive net worth, no additional funding from the U.S. Department
of the Treasury was required under the terms of the Senior Preferred
Stock Purchase Agreement for the third quarter.
-- Third quarter 2009 results reflect:
-- Net interest income of $4.5 billion;
-- Net impairment of available-for-sale securities recognized in
earnings of $1.2 billion; and
-- Provision for credit losses of $7.6 billion.
-- During the third quarter of 2009, Freddie Mac continued to support the
housing market by:
-- Supporting the Obama Administration's Making Home Affordable
program
- enabling more than 78,000 struggling borrowers (more than 88,000
outstanding as of September 30, 2009) to accept offers to modify
their loans under the Home Affordable Modification program and
approximately 69,000 borrowers (approximately 98,000 year-to-date
as
of September 30, 2009) to lower their payments under the Freddie
Mac
Relief Refinance Mortgage(SM);
-- Helping approximately 26,000 additional borrowers stay in their
homes or sell their properties through the company's
long-standing,
traditional foreclosure prevention programs; and

-- Providing liquidity to the mortgage market by purchasing or
guaranteeing $125 billion in mortgage loans and mortgage-related
securities, including $91 billion in single-family refinance
volume.

Freddie Mac (NYSE: FRE) today reported a net loss of $5.0 billion for the
quarter ended September 30, 2009, compared to net income of $768 million for
the quarter ended June 30, 2009. After the dividend payment of $1.3 billion
on its senior preferred stock to the U.S. Department of the Treasury
(Treasury), Freddie Mac reported a net loss attributable to common
stockholders of $6.3 billion, or $1.94 per diluted common share, in the third
quarter of 2009, compared to a net loss attributable to common stockholders of
$374 million, or $0.11 per diluted common share, in the second quarter of
2009.

Freddie Mac had positive net worth of $10.4 billion at September 30, 2009,
compared to positive net worth of $8.2 billion at June 30, 2009. As a result,
no additional funding was required from Treasury under the terms of the Senior
Preferred Stock Purchase Agreement (Purchase Agreement) for the third quarter.
The improvement in positive net worth at September 30, 2009 was attributable
to an $8.5 billion decrease in unrealized losses recorded in accumulated other
comprehensive income (loss) (AOCI), primarily as a result of improved fair
values on the company's available-for-sale (AFS) securities, partially offset
by the third quarter 2009 net loss of $5.0 billion and the dividend payment of
$1.3 billion to Treasury on the senior preferred stock.

"During this critical time for homeowners and the market, we continued to
support the recovery of the housing market by providing a stable source of
mortgage funding and helping people keep their homes," said Freddie Mac Chief
Executive Officer Charles E. Haldeman, Jr. "In the third quarter, we helped
more than 100,000 borrowers avoid foreclosure - a growing figure that includes
more than 78,000 new loans that entered into HAMP trial periods. We expect
this to continue, and we have strengthened our efforts to make MHA successful
and to help families, our economy and our nation.

"We continued to see some positive housing market developments, including
higher volumes of home sales and modest increases in house prices in certain
areas of the country," Haldeman said. "However, we believe that factors like
high unemployment, excess inventory and rising foreclosures will continue to
impede a full recovery for some time and put further downward pressure on
house prices. We expect to request additional funds from Treasury as this
prolonged deterioration of market conditions continues to negatively impact
our financial results.

"Going forward, I'm especially pleased that we've completed a senior
management team that is highly seasoned, highly respected and intensely
focused on serving our mission and strengthening our company," Haldeman added.
"In September, Bruce Witherell - a veteran Wall Street manager and leader -
joined us as our chief operating officer. In October, Ross Kari - an
executive with substantial housing finance experience in both the GSE and
private sectors - became our chief financial officer. Our leadership team,
working with our board of directors and our highly skilled employees, is
committed to doing everything we can to serve our broad mission and speed the
recovery of the U.S. housing market."

GAAP Results

Third quarter 2009 results were driven primarily by $7.5 billion in
credit-related expenses reflecting the challenging economic conditions during
the third quarter, as well as $1.2 billion of net impairment of AFS securities
recognized in earnings. These results were partially offset by $4.5 billion
in net interest income mainly due to lower funding costs.

Three Months Ended
September 30, June 30, September 30,
($ in millions) 2009 2009(1) 2008(1)
---- ---- ----

Net interest income $4,462 $4,255 $1,844
Management and guarantee
income 800 710 832
Other non-interest
income (loss) (2) (1,882) 2,505 (12,235)
------- ----- --------
Total revenues 3,380 7,470 (9,559)
----- ----- -------
Administrative expenses (433) (383) (308)
Credit-related expenses (7,481) (5,208) (6,035)
Losses on loans purchased (531) (1,199) (252)
Other non-interest expense (97) (97) (1,171)
---- ---- -------
Total expenses (8,542) (6,887) (7,766)
------- ------- -------
Income (loss) before income
tax benefit (expense) (5,162) 583 (17,325)
Income tax benefit (expense) 149 184 (7,970)
--- --- -------
Net income (loss) $(5,013) $767 $(25,295)
Less: Net (income) loss
attributable to
noncontrolling interest 1 1 -
--- --- ---
Net income (loss)
attributable to Freddie Mac $(5,012) $768 $(25,295)
======= ==== ========

Senior preferred stock
dividends declared $(1,294) $(1,149) $-
======= ======= ==

Total equity (deficit) / GAAP
net worth (at period end) $10,406 $8,232 $(13,698)
======= ====== ========
AOCI, net of taxes (at
period end) $(26,355) $(34,815) $(25,634)
======== ======== ========

(1) Certain amounts in prior periods have been reclassified to conform
to the current presentation.
(2) Three months ended September 30, 2009 includes $(1.2) billion of net
impairment of AFS securities recognized in earnings.

Net interest income for the third quarter of 2009 was $4.5 billion, compared
to $4.3 billion for the second quarter of 2009. The increase was primarily
driven by lower short-term and long-term funding costs. Net interest income
for the third quarter excludes the cost on funds the company received from the
Treasury under the Purchase Agreement, which is reported as dividends paid on
senior preferred stock.

Management and guarantee income for the third quarter of 2009 was $800
million, compared to $710 million for the second quarter of 2009. This
increase reflects higher amortization income related to certain pre-2003
deferred fees due to the decrease in forecasted interest rates, which resulted
in an increase in projected prepayments.

Other non-interest income (loss) for the third quarter of 2009 was a loss of
$1.9 billion, compared to income of $2.5 billion for the second quarter of
2009. During the third quarter of 2009, the company recognized $1.2 billion
of net impairment of AFS securities in earnings, compared to $2.2 billion of
net impairment of AFS securities recognized in earnings in the second quarter
of 2009, as the performance of the collateral underlying the company's AFS
securities continued to deteriorate, though to a lesser extent.

Other non-interest income (loss) for the third quarter of 2009 also included
net mark-to-market gains of $42 million, compared to net mark-to-market gains
of $5.2 billion in the second quarter of 2009. Third quarter results reflect
the effect of lower long-term interest rates on the values of the company's
derivatives and trading securities, as well as the impact of tightening
spreads on the value of the guarantee asset.

Credit-related expenses, consisting of provision for credit losses and real
estate owned (REO) operations expense, were $7.5 billion for the third quarter
of 2009, compared to $5.2 billion for the second quarter of 2009.

Provision for credit losses for the third quarter of 2009 was $7.6 billion,
compared to $5.2 billion for the second quarter of 2009. The increase in
provision was primarily driven by observed changes in economic drivers
impacting borrower behavior and delinquency trends for certain loans. The
lower provision in the second quarter of 2009 reflects enhancements made to
the company's estimation methodology in the second quarter, which resulted in
an approximate $1.4 billion reduction in the company's second quarter estimate
of loan loss reserves and provision. Freddie Mac expects its provision for
credit losses will remain high during the fourth quarter of 2009.

During the third quarter, the company saw further deterioration in its
single-family guarantee portfolio.

-- Total single-family delinquency rate, excluding Structured
Transactions,
was 3.33% at September 30, 2009, compared to 2.78% at June 30, 2009.
This increase was due to 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 (HAMP) that might otherwise have
completed modification or proceeded to foreclosure.
-- Single-family net charge-offs increased to $2.2 billion in the third
quarter of 2009, compared to $1.9 billion in the second quarter of
2009.

-- Single-family non-performing assets including REO properties and
delinquent loans underlying the company's issued PCs and Structured
Securities, increased to $91.6 billion at September 30, 2009, compared
to $76.9 billion at June 30, 2009.

REO operations income (expense) for the third quarter of 2009 was income of
$96 million, compared to an expense of $9 million for the second quarter of
2009. The income for the third quarter was driven by lower disposition losses
as well as recoveries of property write-downs due to the stabilization of REO
fair values during the quarter.

Losses on loans purchased for the third quarter of 2009 was $531 million,
compared to $1.2 billion for the second quarter of 2009. The decrease was due
to a significant reduction in the purchase volume of delinquent and modified
loans as the volume of seriously delinquent loans entering the HAMP trial
period increased during the third quarter. A loan that has begun the trial
period under HAMP will not be modified and purchased out of the PC pool until
the borrower successfully completes the payment and documentation requirements
of the trial period.

AOCI, net of taxes as of September 30, 2009 was a loss of $26.4 billion,
compared to a loss of $34.8 billion as of June 30, 2009. The $8.5 billion
decrease in unrealized losses recorded in AOCI for the third quarter of 2009
primarily resulted from improved values on the company's AFS securities.

For a more detailed discussion of results, see "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" in the company's
Quarterly Report on Form 10-Q for the quarter ended September 30, 2009. For a
discussion of risks and uncertainties that could adversely affect the
company's business, financial condition, results of operations, capital
position, cash flows, strategies and/or prospects, see "NOTE 1: SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES" in the company's Quarterly Reports on Form
10-Q for the quarters ended June 30, 2009 and September 30, 2009, "RISK
FACTORS" and "NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES" in the
company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2009,
and "BUSINESS", "RISK FACTORS" and "NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES" in the company's Annual Report on Form 10-K for the year ended
December 31, 2008.

Net Worth and Senior Preferred Stock

Freddie Mac's net worth was $10.4 billion at September 30, 2009. Net worth
represents the difference between the company's assets and liabilities under
generally accepted accounting principles (GAAP) and is equal to the company's
total equity (deficit).

The aggregate liquidation preference of the company's senior preferred stock
was $51.7 billion as of September 30, 2009. The amount remaining under
Treasury's $200 billion funding commitment as of September 30, 2009 was $149.3
billion, which does not include the $1 billion of senior preferred stock
issued to Treasury as initial consideration for its funding commitment. Based
on the current aggregate liquidation preference of $51.7 billion, Treasury,
the holder of the senior preferred stock, is entitled to annual cash dividends
of approximately $5.2 billion, which exceeds the company's annual historical
earnings in most periods. Including the $1.3 billion quarterly dividend paid
on September 30, 2009, the company has paid aggregate dividends of $3.0
billion in cash on the senior preferred stock to Treasury at the direction of
the Federal Housing Finance Agency (FHFA), acting as Conservator.

Freddie Mac expects to request additional draws under the Purchase Agreement
in future periods due to a variety of factors that could adversely affect the
level and volatility of the company's net worth. For a discussion of these
factors, see "LIQUIDITY AND CAPITAL RESOURCES - Capital Adequacy" in the
company's Quarterly Report on Form 10-Q for the quarter ended September 30,
2009.

Freddie Mac is under conservatorship and is dependent upon the continued
support of Treasury and FHFA in order to continue operating its business.

Foreclosure Prevention and Refinancing Activities

During the third quarter, Freddie Mac continued to provide significant support
to the housing market by working with struggling borrowers and lenders to
prevent foreclosures whenever possible. The company helped more than 100,000
borrowers stay in their homes or sell their properties during the third
quarter as detailed below:

Three Months Ended
September 30, June 30, September 30,
(number of loans) 2009 2009 2008
---- ---- ----
Total loan modifications 9,013(1) 15,603 8,456
Repayment plans 7,728 7,409 10,270
Forbearance agreements 3,469 1,564 828
Pre-foreclosure sales 6,628 4,821 1,911
----- ----- -----
Total completed foreclosure
alternatives 26,838 29,397 21,465
====== ====== ======
HAMP trial period loans(2) 78,484 10,129 -

(1) Includes 471 loans modified under HAMP during the three months ended
September 30, 2009, based on information reported by the company's
servicers to the Making Home Affordable (MHA) program administrator.

(2) Based on information provided by the company's servicers to the MHA
program administrator. Prior period data was previously reported
based on information from certain of the company's largest servicers
and has been subsequently revised.

Making Home Affordable was the company's number one focus and the centerpiece
of its foreclosure-prevention efforts. During the quarter, Freddie Mac
continued to enhance its infrastructure and capacity to support the MHA
program, and saw significantly increased activity in both of its key programs
- HAMP and the Freddie Mac Relief Refinance Mortgage(SM), which is Freddie
Mac's implementation of the Home Affordable Refinance program.

Based on information provided by the MHA program administrator, more than
88,000 trial period modifications were started on Freddie Mac loans through
September 30, 2009 and approximately 471 HAMP loan modifications were
completed.

The completion rate for HAMP loans, which is the percentage of loans that
successfully exit the trial period due to the borrowers fulfilling the
requirements for the modification, remains uncertain due to the number of new
requirements of this program and the ability to obtain updated information
from borrowers.

Freddie Mac has launched several initiatives to modify more loans under HAMP
and to drive an increase in the number of successful trial period completions.
As part of these efforts, Freddie Mac has:

-- Engaged a vendor to help ease backlogs at several servicers by
processing requests for HAMP modifications by providing them with
document collection and signature services;
-- Launched a program to complete more HAMP modifications by retaining a
vendor who will visit eligible borrowers at their homes to help them
complete the required trial period documents; and

-- Implemented a second-look program to review whether borrowers are
being
properly considered for HAMP by servicers. Borrowers who do not
qualify
for HAMP are then considered under the company's other foreclosure
prevention programs.

Freddie Mac continued the purchase of refinance mortgages originated under the
Freddie Mac Relief Refinance Mortgage(SM) during the quarter. The company
helped refinance approximately 98,000 loans totaling $20 billion of unpaid
principal balance as of September 30, 2009 under this program. Freddie Mac
expects that the recent enhancements to the Freddie Mac Relief Refinance
Mortgage(SM), which provide for the increase in the maximum allowable
loan-to-value ratio up to 125 percent and the ability to refinance through any
servicer and which became effective on October 1, 2009, will enable more
borrowers to take advantage of the program in the coming quarters. As of
September 30, 2009, Freddie Mac had refinanced over $300 billion in home loans
during the year, creating an estimated $3.8 billion in aggregate annual
interest savings for 1.5 million borrowers.

The company's single-family foreclosure starts ratio, which reflects the
number of single-family loans that entered the foreclosure process during the
quarter as a percentage of the total number of loans in the company's
single-family portfolio at the end of the quarter, was 59 basis points in the
third quarter of 2009. The single-family foreclosure starts ratio for the
second quarter of 2009 was 62 basis points.

Accounting Developments

In June 2009, the Financial Accounting Standards Board issued an amendment to
the accounting standards for transfers of financial assets (SFAS 166) and an
amendment to the accounting standards on consolidation of variable interest
entities (SFAS 167). Both amendments are effective and will be applied
prospectively by the company on January 1, 2010.

Freddie Mac expects that the adoption of these two new amendments will have a
significant impact on its consolidated financial statements, including the
consolidation of its single-family PC trusts and some of its Structured
Transactions. Under these accounting standards, the company will record the
underlying mortgage loans in these single-family PC trusts and some of its
Structured Transactions on its balance sheet. These mortgage loans have an
outstanding unpaid principal balance of approximately $1.8 trillion as of
September 30, 2009. Additionally, under these accounting standards, the
company expects significant changes to its statement of operations, including
a significant increase in interest income and interest expense.

While Freddie Mac continues to evaluate the impacts of adoption, the company
expects that the adoption could have a significant negative impact on its net
worth and could result in additional draws under the Purchase Agreement.
Actual impacts may differ materially from current expectations. For more
information, see "RISK MANAGEMENT - Operational Risks" and "NOTE 1: SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES" in the company's Quarterly Report on Form
10-Q for the quarter ended September 30, 2009.

Additional Information

For more information, including that related to Freddie Mac's conservatorship
and related actions, see the company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 2009, and the company's Consolidated Financial
Statements, Core Tables, and financial results supplement. These documents
are available on the Investor Relations page of the company's Web site at
www.FreddieMac.com/investors.

Additional information about Freddie Mac and its business is also set forth in
the company's filings with the SEC, which are available on the Investor
Relations page of the company's Web site at www.FreddieMac.com/investors and
the SEC's Web site at www.sec.gov. Printed copies of these documents may be
obtained free of charge upon request from the company's Investor Relations
department by writing or calling the company at shareholder@freddiemac.com,
(703) 903-3883 or (800) 373-3343. Freddie Mac encourages all investors and
interested members of the public to review these materials for a more complete
understanding of the company's financial results and related disclosures.

This press release contains forward-looking statements, which may include
statements pertaining to the conservatorship and the company's current
expectations and objectives for the MHA program and other efforts to assist
the U.S. residential mortgage market, as well as the company's future business
plans, liquidity, capital management, economic and market conditions and
trends, market share, legislative and regulatory developments, implementation
of new accounting standards, credit losses, internal control remediation
efforts, and results of operations and financial condition on a GAAP, Segment
Earnings and fair value basis. Management's expectations for the company's
future necessarily involve a number of assumptions, judgments and estimates,
and various factors, including changes in market conditions, liquidity,
mortgage-to-debt option-adjusted spread, credit outlook, actions by FHFA, the
Federal Reserve, and Treasury, and the impacts of legislation or regulations
and new or amended accounting standards, could cause actual results to differ
materially from these expectations. These assumptions, judgments, estimates
and factors are discussed in the company's Annual Report on Form 10-K for the
year ended December 31, 2008, Quarterly Reports on Form 10-Q for the quarters
ended March 31, 2009, June 30, 2009 and September 30, 2009 and Current Reports
on Form 8-K, which are available on the Investor Relations page of the
company's Web site at www.FreddieMac.com/investors and the SEC's Web site at
www.sec.gov. The company undertakes no obligation to update forward-looking
statements it makes to reflect events or circumstances after the date of this
press release or to reflect the occurrence of unanticipated events.

Freddie Mac was established by Congress in 1970 to provide liquidity,
stability and affordability to the nation's residential mortgage markets.
Freddie Mac supports communities across the nation by providing mortgage
capital to lenders. Over the years, Freddie Mac has made home possible for
one in six homebuyers and more than five million renters. For more
information, visit www.FreddieMac.com.

SOURCE Freddie Mac

MEDIA, Michael Cosgrove, +1-703-903-2123; INVESTORS: Linda Eddy,
+1-703-903-3883