Archive for the ‘Federal Home Loan Mortgage Corporation (Freddie Mac)’ Category

The Effect of Large Investors on Asset Quality: Evidence from Subprime Mortgage Securities

April 4, 2014 Comments off

The Effect of Large Investors on Asset Quality: Evidence from Subprime Mortgage Securities
Source: Federal Reserve Bank of Atlanta

This paper examines how the government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac, the largest investors in subprime private-label mortgage-backed securities (PLS), influenced the risk characteristics and prices of the deals in which they participated. To identify the causal effect of the GSEs, we use the fact that PLS deals in which Fannie Mae and Freddie Mac purchased securities included separate mortgage pools: one specifically created for the GSEs and one or more others directed at other triple-A investors. Using within-deal variation, we find that the pools bought by Fannie Mae and Freddie Mac had similar ex-ante risk characteristics but performed much better ex-post relative to other mortgage pools in the same deals. These effects were concentrated in low-documentation loans and in issuers that were highly dependent on Fannie Mae and Freddie Mac. Our results extend the importance of disciplining effects of large claimholders beyond information-sensitive securities, such as equities and bank debt, to information-insensitive arm’s-length debt.

Freddie Mac Reports Fourth Quarter and Full-Year 2010 Financial Results

February 24, 2011 Comments off

Freddie Mac Reports Fourth Quarter and Full-Year 2010 Financial Results (PDF)
Source: Federal Home Loan Mortgage Corporation (Freddie Mac)

  • Fourth quarter 2010 net loss was $113 million, mainly reflecting:

  • Net interest income of $4.3 billion; and
  • Derivative gains of $1.6 billion; offset by
  • Provision for credit losses of $3.1 billion; and
  • Net security impairments of $2.3 billion.
    Fourth quarter 2010 total comprehensive income was $1.2 billion, consisting of:

  • Net loss of $113 million; more than offset by
  • Increase in accumulated other comprehensive income (loss) of $1.3 billion.
  • The company had a net worth deficit of $401 million at December 31, 2010 due to several contributing factors including its $1.6 billion quarterly dividend payment to Treasury, which exceeded total comprehensive income for the fourth quarter. To eliminate this deficit, FHFA, as Conservator, will submit a $500 million draw request to Treasury. Including the amount to be requested from Treasury, the aggregate liquidation preference of the senior preferred stock will increase to $64.7 billion.
  • Full-year 2010 net loss was $14.0 billion while total comprehensive income was $282 million, which reflects an increase in accumulated other comprehensive income (loss) of $14.3 billion.
  • New single-family business acquired in 2009 and 2010 continues to demonstrate strong credit quality based on borrower credit scores and loan-to-value ratios.
  • Single-family serious delinquency rate of 3.84 percent at December 31, 2010 remains below industry benchmarks.
  • Freddie Mac continues to lead efforts to allow borrowers to keep their homes, helping more than 275,000 borrowers avoid foreclosure during 2010, more than double the number of borrowers it helped in 2009.