The CEO of Freddie Mac today reminded the public – regulators included – that it owns almost a quarter of U.S. mortgages, but the government-sponsored enterprise only accounts for less than 10 percent of seriously delinquent mortgages.
By contrast, Freddie Mac CEO Ed Haldeman said, “private label securities represent only 12 percent of first mortgages outstanding, but they account for one third of seriously delinquent loans.”
Haldeman’s seemingly on-the-defensive statements come days after the new primary regulator over Freddie Mac and GSE sibling Fannie Mae – the Federal Housing Finance Agency – proposed new guidelines. The FHFA said the two companies cannot use subprime-related debt or risky “private-label” securities to satisfy government-mandated goals of helping certain families in need of home-financing assistance.
Fannie Mae and Freddie Mac were placed into “conservatorship” in 2008 after regulators feared the companies would not have sufficient capital to cover massive losses incurred with the purchases of high-risk private-label securities.
Haldeman, who joined Freddie Mac in August, wrote about the Freddie Mac and Fannie Mae in this week’s “Featured Perspective” article on http://freddiemac.com, with the title: Serving the Housing Market in Good Times and Bad.
“Throughout the housing crisis, we’ve continued to supply an ongoing stream of funding for mortgages, every day, in all geographic markets,” Haldeman said. “In fact, Freddie Mac and Fannie Mae together funded almost three quarters of all mortgage loans originated last year.”
Haldeman said public perception is that Freddie Mac’s loans are seriously delinquent, with estimates usually starting at 1 in 5.
“The truth is, less than 1 in 25 of our loans are seriously delinquent,” Haldeman said. “This record puts us among the very best in the industry. And it underscores how we’re a source of both liquidity and stability for the housing finance market.”
One of Freddie Mac’s key priorities, as defined by its regulator is providing constant and stable support to the housing market, Haldeman said. Freddie Mac said it purchased or guaranteed more than half a trillion dollars in mortgages and mortgage securities last year, and helped 2.2 million borrowers and 350,000 renters.
“And we’ve done this at a time when most other sources of liquidity have dried up,” Haldeman said. “Even when private label investors abandoned the market, Freddie Mac continued to serve our mission on behalf of homeowners and renters across the nation.”
