Freddie Mac Foreclosures to Rise as Delinquencies Accelerated

Time icon October 27th, 2009 by Autor Joseph Smith

Freddie Mac foreclosures are expected to grow in the coming months following reports of an increase in the number of delinquencies on loans guaranteed by the Federal Home Loan Mortgage Corp., the second biggest home funding company in the United States.

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.

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