Will Freddie Be The Survivor?

The question is is: with Fannie Mae still awash in red ink, could Freddie Mac survive as THE conforming agency in the long run?  Here are the latest results from Freddie Mac:

Home loan finance giant Freddie Mac said it lost just short of a billion dollars last quarter, though it did not ask taxpayers for more aid as the loss stemmed from interest payments to the government. The second-largest U.S. residential home loans funds provider reported net loss attributable to common shareholders of $929 million in the first quarter, including a $1.6 billion payment to the government. Without that interest payment, Freddie Mac earned about $676 million in the first three months of the year. That’s the first three month period since the second quarter of 2009 that the firm reported positive net income, excluding the interest payment, and stems from higher quality loans made in recent years.

The first-quarter loss, including the interest payment, represents about $0.29 per share. Freddie Mac and its sister firm Fannie Mae have taken more than $150 billion in taxpayer aid since they were seized by the government in late 2008. Interest repayments to Treasury from the two firms have reduced their net taxpayer assistance to slightly more than $134 billion. Freddie Mac said those interest payments would increasingly drive any need for future taxpayer assistance. Asked if the government should rethink its requirement that it should have to pay 10 percent interest on its government aid, Freddie Mac chief financial officer Ross Kari told Reuters it is the cost of doing business. “What we think doesn’t matter,” Kari said. The firms are effectively controlled by the Federal Housing Finance Agency. Source: Reuters

Freddie Mac released the results of its first quarter refinance analysis showing homeowners who refinance continue to strengthen their fiscal house. In the first quarter of 2011, 3-out-of-4 homeowners who refinanced their first-lien home loan either maintained about the same loan amount or lowered their principal balance by paying-in additional money at the closing table. Fifty-four percent maintained about the same loan amount, the highest share since 1985, when Freddie Mac began keeping records on refinancing patterns. In addition, 21 percent of refinancing homeowners reduced their principal balance. “Cash-out” borrowers, those that increased their loan balance by at least five percent, represented 25 percent of all refinance loans; the average cash-out share over the past 25 years was 62 percent. The net dollars of home equity converted to cash as part of a refinance, adjusted for inflation, was at the lowest level in 15 years (third quarter of 1996). In the first quarter, an estimated $6.0 billion in net home equity was cashed out during the refinance of conventional prime-credit home loans, down from $9.1 billion in the fourth quarter and substantially less than during the peak cash-out refinance volume of $83.7 billion during the second quarter of 2006.  Source: Freddie Mac

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