Friday, March 1, 2013

Calculated Risk: Freddie Mac: $4.5 Billion Net Income, No Treasury Draw, REO Declines

Net income for the fourth quarter of 2012 was $4.5 billion, compared to $2.9 billion for the third quarter of 2012. The increase primarily reflects a shift from a provision for credit losses in the third quarter to a benefit for credit losses in the fourth quarter due to a decrease in the volume of newly delinquent single-family loans and continued improvement in national home prices, as well as a higher income tax benefit primarily driven by the favorable resolution of tax matters with the Internal Revenue Service (IRS). These favorable impacts were partially offset by higher net security impairments.
Freddie Mac does not require a draw from Treasury for the fourth quarter of 2012 because the company had positive net worth at December 31, 2012. The company's $8.8 billion net worth at December 31, 2012 reflects $4.9 billion in net worth at September 30, 2012 and fourth quarter comprehensive income of $5.7 billion, partially offset by the $1.8 billion quarterly dividend payment to Treasury on the company's senior preferred stock.
On Real Estate Owned (REO), Freddie acquired 82,818 properties in 2012, and disposed of 94,296, and the total REO fell to 49,077 at the end of the year.

From Freddie:
In 2012, REO dispositions continued to exceed the volume of REO acquisitions. We believe our single-family REO acquisition volume in 2012 and 2011 was less than it otherwise would have been due in part to the length of the single-family foreclosure timeline, particularly in states where judicial foreclosures (those conducted under the supervision of the court) are required.

During 2012, our REO property inventory declined most in the West region primarily due to increased disposition activity and strengthening home prices in California.

The North Central region comprised 42 percent of our REO property inventory at December 31, 2012. We continue to have a significant number of properties in our REO inventory that we are unable to list because they are occupied or in states with a redemption period, particularly in Michigan, Minnesota and Illinois. States with redemption periods require a period of time after foreclosure during which the borrower may reclaim the property.
Click on graph for larger image.

This graph shows REO inventory for Freddie.

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