Last month, Freddie Mac’s mortgage investment portfolio increased by an annualized rate of 7.3 percent while delinquencies on the loans it insured accelerated. On a year-to-year basis, the Freddie Mac portfolio grew in size by 3.4 percent to $784.2 billion from $736.9 billion in September 2008.

For the second quarter of this year, Freddie Mac reported a profit, indicating that for the meantime, it has no need for additional federal funding.

In September, Freddie Mac loan delinquencies rose to 3.33 percent from 3.13 percent the previous month and 1.22 percentage points in September 2008. The high percentage growth in loan delinquencies has prompted several industry experts to expect more Freddie Mac foreclosures before the end of this year.

Also last month, the delinquency rate for multifamily home loans rose slightly to 0.11 percent compared with 0.10 percent the previous month. The delinquency rate was at a low of 0.01 percent in September of last year.

Meanwhile, the purchase volume for refinance loans dropped by $21.4 billion last month from $35.6 billion in August. But refinancing activity was in an accelerated pace last year, with $52 billion posted in March as the biggest volume since 2003.

The total amount of mortgage-related investment agreements entered by Freddie Mac last month hit $4.6 billion, a drop of $12.1 billion from August. In an annualized level, the total mortgage portfolio rose by 0.8 percent to $2.243 trillion in September.

In a separate note, Freddie Mac has announced that it will permit some of its borrowers to turn their foreclosed houses into rentals. The company explained that the initiative is designed to prevent vacant and foreclosed properties from deteriorating.

Furthermore, the company also announced that renters will be allowed to stay in their houses despite their landlords going into some foreclosure proceedings. So far, Freddie Mac foreclosures totaled 8,500, with many of these properties unoccupied.

Industry experts voiced out support for Freddie Mac’s initiative, saying that keeping foreclosure homes occupied ensures that they will be in good condition always and will help boost property prices and values and expedite the recovery of the housing market.

The U.S. Department of Housing and Urban Development (HUD) hosted a party in Seattle during the Recovery Act in Action Week. Some of the party highlights included HUD Secretary Shaun Donovan’s broadcast message, networking, webinars and technical assistance for recovery programs.

Currently, the HUD is providing a total of $3.47 billion in competitive grants for Native American and public housing, green retrofitting for federally-assisted houses and neighborhood stabilization projects.

Last February, the HUD allocated about $10.1 billion Recovery Act funds, with $168.6 million received by Washington.

HUD’s Office of Field Policy and Management deputy director Dave Ziaya said that Seattle could apply for the competitive grants which are set up not just for neighborhood stabilization and bank REO properties prevention programs.

HUD deputy regional director Martha Dits said that there are many agencies in Seattle that could seek funding, adding that there is a lot of interest and enthusiasm on the recovery funds.

Brookings Institute’s Metropolitan Policy Program Vice President Bruce Katz noted that the recovery grants are motivating counties and cities to work together and with private partners. He added that parties involved have recognized the links between energy, housing and transit.

Meanwhile, the government-controlled mortgage company Federal Home Loan Mortgage Corp. or Freddie Mac has announced that it would ease loan refinancing rules to help more homeowners avoid bank REO properties.

Freddie Mac will allow borrowers of loans guaranteed by the agency or who are current on their mortgages to refinance their troubled loans through any affiliated lenders. Currently, troubled loans are only refinanced through lenders who gave out the mortgages.

The program is part of the Home Affordable Refinance plan, under the Making Home Affordable program of the Obama Administration.

The refinancing program allows renewed financing at low interest rates for as many as 5 million borrowers who have good mortgage payment histories on loans guaranteed by Freddie Mac or its sister company, the Federal National Mortgage Association.

Last April, filings of foreclosures were made on 52.8 percent homeowners daily, an increase from the 24.5 percent for the same period last year. In Snohomish and King counties, 0.7 percent of properties were in danger of becoming bank REO properties and 2.3 percent mortgages were delinquent for at least 90 days.

Freddie Mac economists reported that 50 percent of homeowners who refinanced their mortgage loans with Freddie Mac in the first quarter had reduced their yearly mortgage rate by 20 percent or more and that only 42 percent of refinancing borrowers obtained loans on their home equity, the lowest level in almost 6 years.

However, the economists also reported that the glut of foreclosed homes has pushed down the median house appreciation, which is used as basis for loan refinancing, to just 3 percent, the smallest growth in 6 years.

Frank Nothaft, chief economist and senior vice president of Freddie Mac, said homeowners who refinanced were able to lower their monthly payments by around $160 on a loan of $200,000 after the application of reduced mortgage rates.

Nothaft said the reductions in monthly payments can be translated into approximately $2.5 billion in cash savings that the homeowners can use next year. He added that if the current pace of refinancing keeps up, homeowners can accumulate up to $10 billion in savings in the first year of loan refinancing. Aside from the savings, the homeowners were able to achieve their more important goal of saving their houses from becoming foreclosed homes.

According to Freddie economists, their study on savings from mortgage rates is important during these times when the nationwide unemployment rate is soaring, the sources of family income are dwindling and the number of foreclosed homes continues to rise in many areas. They said the increase in savings from mortgage rates contributed to the rise in consumer spending in the first quarter.

In addition, the Mortgage Bankers Association said that applications for mortgage refinancing increased after the U.S. Federal Open Market Committee told the public about its plan to purchase mortgage-backed securities and Treasury securities. The bankers cited the committee’s announcement as a factor in the decline of mortgage rates that also pushed the increase in sales of existing homes, including foreclosed homes, in many areas of the country.

Even so, the positive effects of the sharp rise in the MBA mortgage refinance index could be hindered by the slow rise in home values, which is largely caused by the glut of foreclosed homes nationwide.

Officials have found him dead in his Fairfax residence on this Wednesday morning and suspect it to be a suicide case with no foul play. However, investigations are still on in this case before reaching any final conclusions.

According to official sources, David Kellermann was employed with Freddie Mac and associated with this company for almost 16 years. He served the company diligently while holding important positions within the company as Vice President of the company.

Kellermann managed all the financial responsibilities of the company including financial planning, annual budgeting while looking after all the financial regulations and managing issues related to tax compliance.

It is believed that Kellermann used to report to the former CEO David Moffett and held several prestigious positions in the company as Senior Vice President, Corporate Controller and also as accounting officer. Kellermann, 41, was named the CFO of the company in last September when the federal government removed some of the high-level employees of the company after taking over the company.

Apparently, Freddie Mac had suffered huge financial losses reported to be in billions along with sister concern, Fannie Mae recently, after making huge investments in various mortgage related areas. Both these firms have received a bailout package amounting to $60 billion so far from the government.

The NCLC claims that 30 states and the District of Columbia allow mortgage lenders to auction off foreclosed homes even without filing notices in the courts. The center also noted that renters in these states are given more consideration than homeowners.

NCLC found that while many states have amended their laws to protect tenants, they have not changed laws that clearly tilt the law against troubled homeowners and favor the mortgage lenders. Lawyer Geoff Walsh, co-author of the NCLC study, said that amending laws related to foreclosed homes will help stop the continued increase of foreclosed properties.

Meanwhile, the National Association of Home Builders applauded the tax credits provided by the Obama foreclosure prevention program for homeowners of energy-efficient homes. More tax credits will entice more homebuyers and will re-energize the homebuilding industry.

The previous energy-efficiency tax credits expired in 2007, but were extended under the Bush Administration. Now it has been expanded under Obama’s stimulus package. Homeowners can claim tax credits for their energy-efficiency features.

On the other hand, the Real Estate Owned (REO) Rental Initiative launched by Freddie Mac was meant to help renters and previous owners of foreclosed homes and prevent them from being homeless. This initiative will enable them to stay in the foreclosed homes as tenants and will pay Freddie Mac’s property management firm from month to month.

To be eligible for the REO initiative, renters and previous owners need to show Freddie Mac that they can afford to pay the rentals and that they are willing to open their properties to prospective buyers while they are renting the properties.

To help more American homeowners at risk of losing their properties to listings of foreclosed homes, Freddie Mac has extended its foreclosure moratorium and has suspended eviction proceedings until the first day of April. The suspension will give more time to borrowers to learn all about available schemes under President Obama’s foreclosure prevention program.

Freddie Mac lost $7.37 per share, totaling $23.9 billion, in the fourth quarter. The losses were due to bad loans and write-down for derivatives used for interest rate hedging. In the same quarter of the previous year, Freddie lost $3.97 per share, totaling $2.5 billion.

For the whole year of 2008, Freddie lost $34.60 per share, totaling $50.1 billion. Almost all of the losses occurred in the last months, following Freddie’s takeover by the federal government in September. Its funds were used to buy or guarantee mortgages from lenders as they were battered by foreclosures.

Company executives explained that Freddie absorbed losses as it carried out its mission to help mitigate foreclosures, stabilize the mortgage market and rejuvenate the housing sector. They said they infused over $460 billion to provide liquidity to the mortgage industry which was drowning from continued foreclosures.

In July 2008, when then-Treasury Secretary Henry Paulson asked Congress for a $200-billion credit line for Freddie and Fannie, which it also acquired together with Freddie, Paulson promised lawmakers the credit lines would not be actually used. They will serve only as a deterrent to hostile speculators that will target the companies.

But because of the unending foreclosures that clobbered the financial industry, both Freddie and Fannie had to break that promise. Freddie had already used $14 billion of the credit line while Fannie had already asked for a $15 billion drawdown after it posted a loss of $59 billion for 2008.

Freddie’s executives soothed critics by explaining that the $30.8 billion funding will increase the value of taxpayers’ preferred stock position and will give them $4.6 billion in yearly dividends from the mortgage company. The executives said they have given to the Treasury the first taxpayers’ dividend in December.

The amount of $30.7 billion is the difference between Freddie Mac’s assets and liabilities as of December 2008. Freddie’s shares, which were priced as high as $67 in the middle of 2007 and as high as $34 in early 2008, remained at 42 cents this week as it continued to carry out its role in President Obama’s program to stop foreclosures.

Moffett was appointed CEO of Freddie Mac when the federal government took control of the mortgage firm to save it from collapse in September. The flood of foreclosures overwhelmed the mortgage company, necessitating its rescue by the government to prevent the collapse of the mortgage market and protect millions of homeowners threatened by foreclosures. Freddie Mac, together with Fannie Mae, was put under conservatorship by the Federal Housing Finance Agency. Fannie Mae’s chief executive Daniel Mudd was also replaced by Herb Allison, the previous CEO of TIAA-CREF.

Freddie Mac chairman John Koskinen told reporters Moffett made significant contributions during Freddie’s crucial transition period. Moffett also worked with the FHFA to help control the onslaught of foreclosures and bring back stability to the mortgage and housing sectors.

Last year, Freddie Mac posted losses totaling $25 billion in the third quarter equivalent to $19.44 per share while Fannie Mae posted about the same loss, $25.2 billion, equivalent to $10.27 per share. Freddie Mac has already received almost $14 billion in federal assistance since its takeover and may still require billions of capital infusion for its continued operation. As foreclosures continue to rise in many areas despite mitigation efforts, Freddie Mac may still need about $35 billion to continue to carry out its mandate as part of Obama’s $75 program to avert foreclosures.

Under President Obama’s Homeowner Stability Initiative, Freddie Mac and Fannie Mae will offer refinancing with low mortgage rates to homeowners who have little or zero equity in their homes. They will help maintain affordable mortgage rates and help stabilize the mortgage market. These two mortgage firms will also continue to be supported with funding by the Treasury Department. The Treasury will increase its preferred stock purchase agreements with the mortgage firms from $100 billion each to $200 billion each. It will also continue to buy Fannie Mae and Freddie Mac’s mortgage-backed securities to help promote liquidity in the housing market battered by foreclosures.

They were each given a $100-billion lifeline from the government and they accounted for more than 75 percent of mortgage originations towards the end of last year. Their activities injected the much needed cash-flow required by the financing and lending sectors, which made their importance clear for both homebuyers and lenders.

As indicated by the Federal Housing Finance Agency, the federal entity regulating these two companies, the Obama administration has made it clear that Fannie Mae and Freddie Mac will continue on their key role of stabilizing the housing market. Each will play a vital part in the tax foreclosure properties prevention program planned by the new administration. These plans include:

• Fannie Mae and Freddie Mac to create provisions for low-cost refinancing access to borrowers having little or no remaining equities on their homes. This move is expected to help at least 5 million borrowers from losing their homes to foreclosures.
• As part of the $75 billion loan modification program, Fannie Mae and Freddie Mac will contribute over $20 billion to help subsidize interest rate reductions for struggling borrowers with tax foreclosure properties.

For these two struggling companies to accomplish their tasks, the administration will pour in at least $200 billion each in support, which is double than previous levels. On top of that, the administration has agreed that the two companies can guarantee or own mortgages up to $900 billion, which is higher than the previous $850 billion.

This added support and funding from the government comes at a very crucial time for the two companies, which are reeling from the impact of soaring defaults and tax foreclosure properties as the economy continues to plummet. Both firms are expected to report huge fourth quarter losses. With these trends, both entities may need more than $200 billion each from the government, but the administration has made it clear that the federal government will be there to back them up.

The new program, announced to representatives from the U.S. Treasury Department, the Department of Housing and Urban Development, Wells Fargo and Company and Hope Now, is estimated to help thousands of homeowners in danger of losing their homes to foreclosures.

The program is designed to restructure loans and reduce monthly payments down to affordable levels. Target amortizations should not exceed 38 percent of the family’s gross monthly income. To attain lower monthly payments, interest rates will be reduced, including loan term extension as well as providing deferred payments.

Customized procedures could also be implemented depending on the needs and situation of the homeowners, as long as it can help avoid foreclosures. Part of the program is for the government to pay loan servicers $800 for each modified loan.

The new program is offered to borrowers following a set of criteria. Borrowers are encouraged to start communicating with their lenders and banks to start this process and finally prevent foreclosures. The prerequisites for inclusion are:

a) the borrower is already delinquent by at least three payments
b) have loans that are at least 90 percent of the home value
c) living in these homes as their primary residence
d) have not filed for bankruptcy

The Association of Community Organizations for Reform Now (ACORN) describes the new program as heading in the right direction, although it criticized some of the program prerequisites too restrictive. In response to this, ACORN is calling for a 90-day moratorium on foreclosures to give time for homeowners while the program is still in process.

Still, organizations and lenders alike are hopeful that the new program will finally put a stop to this runaway foreclosures crisis. With affordable monthly payments, families are expected to stay in their homes and work to keep their loans current.

By doing so, the distressed mortgage companies might have the chance to turn such non – performing loans and change them into performing assets. This will, most likely, minimize the losses incurred due to foreclosure. To accomplish this, the companies will have to modify the terms of the mortgages and ease some of their policies, in order to make it easier for the troubled borrowers to meet their obligations.

Many lawmakers have already pressed mortgage lenders to work with the borrowers by adjusting the mortgage loan terms and consequently, reduce balances. By doing so, they will be doing the whole nation a great favor.

Considering that Fannie Mae and Freddie Mac own almost 50 percent of the total residential mortgages – roughly amounting to $12 trillion, they can actually direct mortgage servicers to stop any foreclosure proceeding. For this reason, the Committee members strongly believe that these two federal agencies have the means to minimize the impact of the foreclosure crisis on the entire nation, particularly on the taxpayers.

Across the nation, millions of homeowners facing foreclosure are attempting to work out their mortgage problems with their lenders. Some of them are being assisted by foreclosure counselors who act as mediators. A growing number of defaulted loans have already been modified, allowing the homeowner to stay on their homes.

Many housing advocates have urged distressed homeowners to sit down with their lenders and discuss possible solutions so that both parties can avoid foreclosure. These options include repayment plan, loan modification, short sale, deed in lieu of foreclosure and in some cases, a bankruptcy.