Industry News

Freddie Mac says Q4 losses not related to subprime woes

GSE says it's poised to capitalize on turmoil in mortgage lending

Mortgage repurchaser Freddie Mac reported a net loss of $480 million in the fourth quarter as it upped provisions for losses and saw the value of its investments decline because of a drop in long-term interest rates. In their annual report to investors, Freddie execs emphasized that they are not heavily invested in subprime loans. The abrupt turnaround from a $684 million profit earned during fourth-quarter 2005 was an anticipated consequence of falling interest rates, not the quality of its loans. For the year, Freddie reported profits of $2.2 billion, or $2.84 per share, up from $2.1 billion and $2.75 per share in 2005. Total revenue declined from $5.6 billion in 2005 to $5.2 billion, however, and the increase in profits was largely due to a favorable tax ruling. The government-sponsored entity managed to grow its credit guarantee portfolio by 10.6 percent, to $1.5 trillion, in 2006, a challenging year for lenders. As of Dec. 31, Freddie's $704 billion portfolio of reta...