Freddie Mac's guaranteed loan portfolio is becoming more vulnerable to defaults due to a growing number of single-family mortgages with high loan-to-value ratios.

The percentage of Freddie Mac loans with LTV ratios above 90% had doubled over the past four quarters to 28% as of March 31. These mortgages are "more likely to default in the event of financial hardship," the mortgage giant says in its first quarter financial report. The company expects home prices will decline 5% to 10% this year and unemployment to rise, which will increase credit losses. In March, the percentage of single-family loans 90 days or more past due rose to 2.29%, up 57 basis points from Dec. 31.

"We expect our delinquency rates will continue to rise in the remainder of 2009," Freddie says.

Meanwhile, in related news, the GSE — whose customer base traditionally has been more aligned with depositories — posted a $9.8 billion loss in the first quarter, a far better performance in the period than its sister company, Fannie Mae. Freddie's conservator, the Federal Housing Finance Agency, is asking the Treasury for a $6.1 billion infusion to maintain Freddie's net worth position above zero.

Freddie said it had impairments of $7.1 billion on "available-for-sale" securities and $8.8 billion of provisions for credit losses. Its net interest income grew by almost 400% in 1Q to $3.8 billion (compared to just $798 million in 1Q08) because its funding costs plummeted thanks to government intervention in the credit markets.

Fannie Mae, which released earnings on Friday, lost $23 billion and disclosed that it had $145 billion in nonperforming loans on its books. Fannie's earnings have been hammered by its huge investment in alt-A loans. Also, Fannie's largest customer for many years was Countrywide Home Loans. Countrywide's delinquencies were among the worst in the industry.

Subscribe Now

Access to a full range of industry content, analysis and expert commentary.

30-Day Free Trial

No credit card required. Access coverage of the securitization marketplace, including breaking news updated throughout the day.