Freddie Mac may slow mortgage & bond buys
Freddie Mac, the second-largest US mortgage-finance company, may cut purchases of home loans from banks and bonds backed by housing debt to shore up its capital amid record delinquencies.
By Bloomberg |
NEW YORK: Freddie Mac, the second-largest US mortgage-finance company, may cut purchases of home loans from banks and bonds backed by housing debt to shore up its capital amid record delinquencies.
The government-sponsored company is also considering selling securities and reducing its dividend while it prepares to issue $5.5 billion of stock, Virginia-based Freddie Mac said in a July 18 filing with the US Securities and Exchange Commission. JPMorgan Chase analyst Matthew Jozoff said in a report last week that growth in mortgage holdings of Freddie Mac and the larger Fannie Mae will be ���weak.���
���This just means much less credit availability for mortgage borrowers,��� said Paul Colonna, who manages more than $100 billion as chief investment officer for fixed income at GE Asset Management in Stamford, Connecticut. ���They were teed up to be saviors of the mortgage crisis, but now they���ve got their own capital issues.���
The Bush administration and Congress are depending on the companies to help pull the US out of the housing slump because they buy mortgages from banks, providing money to make new loans. Instead, treasury secretary Henry Paulson was forced to seek Congressional approval last week to extend more credit to the companies and buy their shares after Freddie Mac and Fannie Mae tumbled this year on the New York Stock Exchange composite trading.
Freddie Mac on Monday rose $1.05, or 11%, to $10.23 at 8:09 am in early New York trading. Washington-based Fannie Mae gained $1.75, or 13%, to $15.15. Freddie Mac lost 73% in New York trading this year and Fannie Mae declined 66%.
Combined losses at the companies will probably total $48 billion through 2009, New
York-based Jozoff said in the JPMorgan report dated July 18. ���Mortgage losses are significant, and will probably foster capital conservation from the agencies rather than portfolio growth,��� he wrote.
The government-sponsored company is also considering selling securities and reducing its dividend while it prepares to issue $5.5 billion of stock, Virginia-based Freddie Mac said in a July 18 filing with the US Securities and Exchange Commission. JPMorgan Chase analyst Matthew Jozoff said in a report last week that growth in mortgage holdings of Freddie Mac and the larger Fannie Mae will be ���weak.���
���This just means much less credit availability for mortgage borrowers,��� said Paul Colonna, who manages more than $100 billion as chief investment officer for fixed income at GE Asset Management in Stamford, Connecticut. ���They were teed up to be saviors of the mortgage crisis, but now they���ve got their own capital issues.���
The Bush administration and Congress are depending on the companies to help pull the US out of the housing slump because they buy mortgages from banks, providing money to make new loans. Instead, treasury secretary Henry Paulson was forced to seek Congressional approval last week to extend more credit to the companies and buy their shares after Freddie Mac and Fannie Mae tumbled this year on the New York Stock Exchange composite trading.
Freddie Mac on Monday rose $1.05, or 11%, to $10.23 at 8:09 am in early New York trading. Washington-based Fannie Mae gained $1.75, or 13%, to $15.15. Freddie Mac lost 73% in New York trading this year and Fannie Mae declined 66%.
Combined losses at the companies will probably total $48 billion through 2009, New
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York-based Jozoff said in the JPMorgan report dated July 18. ���Mortgage losses are significant, and will probably foster capital conservation from the agencies rather than portfolio growth,��� he wrote.
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