Freddie Mac lost $4.7 billion in the second quarter, an improvement from the prior period, but bad enough that the GSE is asking the Treasury for $1.8 billion in assistance to keep its net worth position in the black.
When dividend payments to Treasury are factored in, the company actually lost $6 billion. In 1Q10, it lost just shy of $8 billion, including dividend payments. In the second quarter of 2009 Freddie had red ink of $840 million.
The GSE said lower derivative losses and provisions for loan losses were the primary reasons for the improvement from the first quarter.
The serious delinquency rate on its $1.8 trillion single-family guarantee portfolio fell 17 basis points to 3.96% in the second quarter, largely due to what it called "seasonal factors, loan modifications and foreclosures."
Even though serious delinquencies improved, loan charge-offs increased to $3.9 billion, from $2.8 billion in the first quarter, driven by higher volumes of short sales and foreclosures.
Freddie's real estate owned (REO) inventory grew by 15% on a sequential basis to $6.2 billion at June 30.
The company reported $40 million in income from its REO sales, which "reflected the recovery of prior period write-downs due to improved REO fair values during the second quarter."
On Friday, its sister company, Fannie Mae reported a net loss of $1.2 billion for the second quarter.
For more on Fannie Mae's results, please click.
In other Freddie Mac news, National Mortgage News also reported that Freddie Mac is getting tough on seller/servicers that are not meeting their obligations to buy back mortgages that went afoul of the GSE's underwriting guidelines.
The GSE currently has $5.6 billion in buyback requests outstanding with 24% of those requests more than 120 days old as of June 30.
To ensure more timely payments, Freddie said it has "begun to require certain seller/servicers to commit to plans for completing repurchases, with financial consequences or with stated remedies for non-compliance, as part of the annual renewals of our contracts with them."
According to its earning statement, Freddie collected $1.4 billion from loan re-purchases in the second quarter, compared to $911 million a year ago.
Fannie Mae reported that its seller/servicers re-purchased $1.5 billion of bad loans in the second quarter, compared to $946 million in the year-ago quarter.
"Our primary mortgage servicer counterparties have generally continued to meet their obligations to us," Fannie said in its second quarter securities filing. The GSE warned, however, that the growth of delinquent loans "may negatively affect the ability of these counterparties to continue to meet their obligations to us in the future."
Meanwhile, Fannie Mae expects buyback requests to remain high in the second half. But it did not disclose the amount of its re-purchase requests that have not been paid.