Freddie Mac's market share dipped in April against arch rival Fannie Mae. A report by Fox-Pitt, Kelton said that Freddie Mac's market share was roughly 31% in April, lower than what it was in March. Freddie's traditional share is 40% to 42%.

"We feel that this will disappoint investors as Freddie Mac's share increased to nearly 39% in March 2003 from 31% in February and January," said analysts at the firm. Fox-Pitt said that all else equal, the continued trend of Freddie's lower market share might mean a slower growth rate for its total book of business or its total mortgage portfolio. This could, in turn, have an effect on the growth rate of its retained portfolio.

The report said that Freddie usually calculates its market share based on mortgage purchases (which are whole purchases for cash) as well as PC/MBS issuance that it had per month. The GSE's new business purchases include: PC issuance, whole loan purchases and other mortgage securities purchases.

Fox-Pitt said that although it does not have data yet relating to new business purchases, the firm determined that PC/MBS issuance has traditionally comprised 85% of new business purchases in a particular month.

Other analysts said that the main factor that has led to Freddie's decrease in market share is servicer concentration. Freddie's collateral is dominated by servicers whose speeds are faster than the market as a whole. In direct contrast, Fannie Mae has more diversity in its portfolio so the prepayments on its collateral are much more in line with the market.

Observers said that this would be very difficult to correct because, as the market prices in Freddie's collateral differently, mortgage originators would refuse to issue Freddie Mac paper because they don't get the same level of execution. Analysts said that it would have to be a deliberate effort by Freddie Mac to really diversify with whom they originate collateral. What would help execution on Freddie Mac securities, however, would be a return of the CMO bid, but analysts said that even then, since Gold IOs are trading cheap, the only thing that could really help Freddie would be a big selloff.

Freddie representatives said that they are aware of this problem, and they are currently looking into it.

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