Nov
03

Mortgage Lender to Seek $6 Billion from Taxpayers

November 03, 2011

Mortgage rates are down again, and so is the company that provides them.

Mortgage-lending giant Freddie Mac reported Thursday that the 30-year fixed rate mortgage (FRM) averaged 4.00 percent for the week ending November 3. That’s the second lowest reading on record since October 6, when the rate averaged an unprecedented 3.94 percent.

All the mortgage options posted declines this week:

*The 15-year FRM averaged 3.31 percent after last week’s 3.38 percent.

*The 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.96 this week after last week’s 3.08 percent.

*The 1-year Treasury-indexed ARM averaged 2.88 percent after last week’s 2.90 percent.

outside shot of freddie mac headquartersDespite the low rates, Freddie Mac is struggling. The government-rescued company reported a comprehensive loss of $4.4 billion in the third quarter, its worst quarterly results this year.

The company actually pulled in $4.6 billion in income but registered a net worth deficit of $6 billion, an amount company officials said it will seek from U.S. taxpayers to make up the difference.

“The weak labor market and fragile economy continue to weigh heavily on the single-family market, causing many potential buyers to sit on the sidelines or opt to rent despite high affordability and record low mortgage rates,” said Freddie Mac Chief Executive Officer Charles E. Haldeman, Jr. “Our financial performance in the third quarter was impacted by the weak housing market, as well as challenging financial market conditions.”

Freddie Mac might be in the hole like the rest of the 99 percent of the country, but the company still feels it did some good this year, if not for home buyers then for home owners.

“While this put a damper on home buying, hundreds of thousands of borrowers were able to refinance into lower mortgage rates or shorter mortgage terms in the third quarter. In fact, the borrowers we helped to refinance will save an average of $2,500 in interest payments during the next year.

“Freddie Mac was a stabilizing force in the mortgage market, ensuring the continuous flow of funds to lenders and borrowers and helping families avoid foreclosure.”

And taking taxpayers money. Freddie Mac, along with its sister program Fannie Mae, have cost taxpayers about $145 billion since the two companies were seized by the government in 2008.

This quarter’s $6 billion request from taxpayers is the largest amount since April of 2010. The government estimates it could cost taxpayers up to $51 billion more to support the companies through 2014.

Categories: Economy

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