Fannie Mae Net Commitments To Buy Up $11.7 Billion In Dec
January 30 2009 - 3:01PM
Dow Jones News
Fannie Mae's (FNM) net commitments to buy mortgage bonds were at
$11.7 billion in December, up from its net commitments of $7.9
billion in November.
Fannie also gave an indication to the extent of decline among
prime borrowers with conforming loans, as its single-family
delinquency rate continued to rise sharply. In December, the rate
shot up to 1.72% from 1.52% in November, and 0.65% at the end of
2007.
The mortgage giant's investment portfolio continued to rise, and
its total balance was at $787.3 billion as of the end of 2008,
nearly $63 billion shy of the $850 billion limit set by its
regulator when the mortgage finance giant was nationalized last
September, according to a monthly report from the company.
It also is an increase of $63.3 billion from the end of
2007.
Sibling and rival mortgage finance company Freddie Mac (FRE)
added $25.365 billion of mortgage bonds to its investment portfolio
in December, and its total holdings stood at $804.8 billion at the
end of 2008.
Over the past couple of months, the role of Freddie and its
sibling Fannie Mae in the mortgage market have diminished as both
the U.S. Treasury and the Federal Reserve have emerged as backstop
buyers with deep pockets.
The U.S. Treasury, so far, has bought nearly $75 billion of
agency mortgage-backed securities, while the central bank bought
$69.46 billion.
However, market participants still keep tabs on Fannie and
Freddie's portfolios as an indication of their financial health,
and their ability to continue to play a role as both guarantors and
buyers of mortgage bonds.
Another vital statistic market participants are watching is the
rapid increase in single-family delinquency rates. That number
increased 24 basis points in November to hit historic highs.
While these numbers are still low, it represents an increased
stress on the company from its holdings of Alt-A and other types of
mortgages lent to borrowers with risky credit profiles.
Meanwhile, Fannie Mae's total book of business increased at an
annualized compound rate of 9.7% in December, and was up 7.7%
year-to-date.
Total Fannie Mae issuance of mortgage bonds was at $37.1 billion
in December, up from $23.8 billion in November.
Issuance of Fannie Mae securities and other guarantees increased
at a compounded annualized rate of 7.8% during the month.
Fannie's duration gap, a measure of the portfolio's sensitivity
to interest rates, averaged one month in December, up from zero in
November.
Freddie and Fannie are chartered by Congress to buy mortgages
from lenders, freeing them to make more loans.
They repackage the mortgages as securities and sell them again.
Both also hold on to large quantities of mortgage securities,
profiting from the difference between the interest rates they pay
and the cost of debt issued to fund their purchases.
-By Prabha Natarajan, Dow Jones Newswires; 201-938-5071;
prabha.natarajan@dowjones.com
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