Freddie Mac had credit-related expenses of $7.5 billion for the third quarter, which was the leading driver of its $6.3 billion net loss to common stockholders.
Without a $1.3 billion dividend payment to the U.S. Treasury, the loss would have been $5 billion. During the quarter, Freddie Mac had further deterioration in its single-family guarantee portfolio.
The delinquency rate went from 2.78% at the end of the second quarter to 3.33% at the end of the third quarter. The company blamed the increase on weak economic conditions and, in part, to extended foreclosure timelines and to a high volume of seriously delinquent loans that are remaining in trial periods under the Home Affordable Modification Program that might have otherwise completed modification or proceeded to foreclosure.
Single-family net charge-offs increased to $2.2 billion in the third quarter of 2009, compared with $1.9 billion in the second quarter of 2009, while nonperforming assets increased to $91.6 billion from $76.9 billion during the same period. Freddie Mac had positive net worth of $10.4 billion at Sept. 30.
As a result of the positive net worth, no additional funding from Treasury was required for the third quarter. The positive net worth reflects an $8.5 billion gain in accumulated other comprehensive income primarily driven by improved values on the company's available-for-sale securities.
In related company news, the GSE listed its mortgage insurance risk at $63.4 billion. Over the past nine months, Freddie Mac has received $658 million from mortgage insurance firms to cover losses on delinquent loans. However, in a new public filing the GSE reveals that if the MI industry collapses, its risk exposure would be the amount listed above.
Eight different MI firms have written policies on Freddie Mac loans with MGIC and Radian being the two largest in terms of outstanding coverage, $15.5 billion and $12.1 billion, respectively.
Despite the shaky state of the housing market not one MI has failed, though one company, Triad Guaranty, is in self-liquidation mode.
In a filing with the Securities and Exchange Commission, Freddie noted that it has "institutional credit risk" relating to "the potential insolvency or nonperformance of mortgage insurers" that cover its loans.
But the GSE also said that, based on "currently available information," it expects that all of its MI counterparties will continue to pay claims even though many have received "credit watch negative" ratings.
The $63.4 billion figure represents the "remaining aggregate contractual limit for reimbursement of losses" of principal, Freddie said.