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Mortgage and financial markets continue to slow housing activity, builders testify

National Mortgage Professional
Mar 11, 2009

Freddie Mac reports Q4 and full-year 2008 financial resultsMortgagePress.comFreddie Mac, statistics, Q4 '08, David Moffett, John Koskinen, Making Home Affordable, conservatorship Freddie Mac has reported a net loss of $23.9 billion, or $7.37 per diluted common share, for the quarter ended December 31, 2008, compared to a net loss of $25.3 billion, or $19.44 per diluted common share, for the quarter ended September 30, 2008. For the full-year 2008, the company reported a net loss of $50.1 billion, or $34.60 per diluted common share, compared to a net loss of $3.1 billion, or $5.37 per diluted common share, for the full-year 2007. "Freddie Mac is working hard to serve our expanded mission in this historic crisis, by doing all we can to help stabilize the financial markets and hasten the recovery in housing," said David Moffett, Freddie Mac's chief executive officer. "We absorbed heavy financial losses last year, driven primarily by mark-to-market items and credit-related expenses. But we also provided vital liquidity to the strapped housing market injecting more than $460 billion in mortgage funding in 2008." Freddie Mac Chairman John Koskinen said, "Going forward, Freddie Mac has an essential role to play in ensuring the Administration's new Making Home Affordable program is a success. We are committed to taking a leadership role in this important initiative and to doing everything we can to keep millions of families in their homes." Fourth quarter 2008 results were driven primarily by net mark-to-market losses of $13.3 billion on the company's derivative portfolio, guarantee asset and trading securities due to the impacts of spread widening and declines in interest rates. In addition, the company recorded $7.2 billion in credit-related expenses related to the continued deterioration in economic conditions during the fourth quarter, including a rapid deterioration in labor markets, steeper declines in home prices, and a drop in consumer confidence to record lows. Results were also impacted by security impairments on the company's available-for-sale securities of $7.5 billion primarily due to sustained deterioration in the performance of the underlying collateral on the companys nonagency mortgage-related securities. In the fourth quarter of 2008, the company recognized an additional valuation allowance of $8.3 billion against its net deferred tax assets. As a result of the fourth quarter 2008 net loss and mark-to-market effects on the company's accumulated other comprehensive income (loss) (AOCI) related to unrealized losses on available-for-sale securities, the companys stockholders' equity (deficit) totaled $(30.7) billion at Dec. 31, 2008. Pursuant to Treasury's funding commitment under the Purchase Agreement, the Director of the Federal Housing Finance Agency (FHFA) has submitted a request to Treasury for funding in the amount of $30.8 billion. The company expects to receive such funds in March 2009. As a result of this draw, the aggregate liquidation preference of the company's senior preferred stock will increase to $45.6 billion, and Treasury, the holder of the senior preferred stock, will be entitled to annual cash dividends of approximately $4.6 billion. An initial cash dividend on the senior preferred stock was paid on Dec. 31, 2008, for the period Sept. 8, 2008 through Dec. 31, 2008, in the aggregate amount of $172 million. On Feb. 18, 2009, Treasury Secretary Geithner issued a statement outlining further efforts by Treasury to strengthen its commitment to Freddie Mac by increasing the funding available from Treasury under the Purchase Agreement from $100 billion to $200 billion, affirming Treasury's plans to continue purchasing Freddie Mac mortgage-related securities and increasing the size limit on the companys mortgage-related investments portfolio at Dec. 31, 2009 by $50 billion to $900 billion with a corresponding increase in the amount of allowable debt outstanding. Freddie Mac is under conservatorship and is dependent upon the continued support of Treasury and FHFA in order to continue operating its business. For more information, visit www.freddiemac.com.
Published
Mar 11, 2009
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