August 25, 2009 / 1:22 PM / 10 years ago

UPDATE 2-Freddie Mac July portfolio down,delinquencies jump

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NEW YORK, Aug 25 (Reuters) - Freddie Mac FRE.P FRE.N, the second-largest U.S. home funding company, on Tuesday said its mortgage investment portfolio shrank by an annualized 44.5 percent rate in July, while delinquencies on loans it guarantees accelerated.

The portfolio decreased to $799.1 billion, for an annualized 1.2 percent decrease year-to-date, the McLean, Virginia-based company said in its monthly volume summary.

The portfolio size, however, was nearly unchanged on a year-over-year basis. In July 2008, the portfolio was $798.2 billion.

Freddie Mac earlier this month 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 2.95 percent of its book of business in July from 2.78 percent in June and 1.01 percent in July 2008.

The multifamily delinquency rate, however, was unchanged at 0.11 percent in July. A year earlier it was 0.03 percent.

Freddie Mac said refinance-loan purchase volume was $34.1 billion in July, down sharply from June’s $50.9 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 and sale agreements entered into during the month of July totaled $11.0 billion, up from the $9.9 billion entered into during the month of June.

The company’s total mortgage portfolio decreased at a 3.3 percent annualized rate in July to $2.234 trillion, for an annualized 2.1 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 Dec. 31, 2009 when they are to start declining by 10 percent per year until they reach $250 billion.

The government is now relying heavily on Fannie Mae and Freddie Mac in its efforts to stimulate the U.S. housing market by buying more mortgage loans, easing refinancing and helping homeowners avoid foreclosure. The housing market has suffered the worst downturn since the Great Depression.

The hard-hit U.S housing market, however, has been showing signs of stabilization, with sales rising and home price declines moderating in many regions of the country. In fact, according to some indexes, home prices in some regions have risen. (Reporting by Julie Haviv)

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