July 23, 2010 / 9:30 PM / 7 years ago

Freddie Mac lowers portfolio, delinquencies slip

NEW YORK, July 23 (Reuters) - Freddie Mac, the second- largest buyer of U.S. residential home loans, said on Friday that it shrank its mortgage investment portfolio in June as it has for four of the first six months of the year.

The delinquency rate on loans that Freddie Mac FMCC.OB guarantees remained elevated, but improved for both single-family and multi-family loans last month, the company said in its monthly summary.

Earlier this year, Freddie Mac bought back the bulk of its seriously delinquent single-family loans from its securities trusts, aiming to stem the drain on its capital and capping the delinquency rate.

The company reduced its mortgage-related investments portfolio by an annual 13.8 percent rate, or by $8.6 billion, in June to $739.5 billion.

The holdings, a key concern of many lawmakers citing concentrated risk at both Freddie Mac and its larger counterpart Fannie Mae FNMA.OB, have fallen from $755.3 billion at the end of 2009 and from $829.8 billion a year ago.

“We have been in a low-growth mode in our retained portfolio for much of this year, with most of the growth in portfolio related to purchase of seriously delinquent loans from pools backing our PC securities,” Freddie Mac spokesman Michael Cosgrove said.

Purchases into the portfolio were about $9.5 billion in June, up from $7.7 billion in May, mostly driven by Freddie Mac’s ongoing purchase of delinquent loans, he said.

The two companies, which went into conservatorship in September 2008, and are relied upon heavily to foster mortgage activity as private lending evaporated. Freddie Mac and Fannie Mae have borrowed a combined $145 billion in federal aid and have an open checkbook with the Treasury Department through 2012.

Freddie Mac’s total mortgage portfolio fell at an annual rate of 0.9 percent in June to $2.22 trillion, having ended 2009 at $2.25 trillion.

The pace of late payments on single-family Freddie Mac loans improved in June to 3.96 percent from 4.06 percent in May and from a peak this year of 4.20 percent in February. But a year ago, the rate was 2.89 percent.

“Since we include loans in the HAMP trial period as delinquent in our statistical reporting, this results in a temporary rise in our delinquency rate until the modifications become effective and are removed from delinquent status,” Cosgrove said.

Delinquencies on multifamily loans dipped to 0.28 percent in June from 0.32 percent in May, the year’s high, and remain well above 0.16 percent a year ago.

Freddie Mac and Fannie Mae buy loans from banks, package them for sale to investors or hold in their own portfolios. (Reporting by Lynn Adler; Editing by Jan Paschal)

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