Mortgage Daily

Published On: January 29, 2003
Record Purchases for Freddie as Earnings Restated

$642 billion business purchases during 2002

January 29, 2003

By staff

Mortgage phenomenon Freddie Mac reported record mortgage purchases for 2002, a leader of the pack of companies that the busy year benefited. The company also announced that it will restate earnings upward.

The business purchase volume of the government-sponsored housing enterprise totaled $642 billion during 2002, up more than one-third from 2001. This increase drove up Freddie’s total mortgage portfolio 15% to $1.311 trillion at the end of 2002.

Business purchase volume during the fourth quarter reached $239 billion during the fourth quarter, an almost three-fourths increase from third quarter and a 68% increase from fourth quarter 2001.

“Strong portfolio growth and continued credit strength drove our performance during the year,” president David W. Glenn said. “Our credit losses for the year represented less than 1 bp of our total mortgage portfolio.”

Freddie’s retained portfolio grew to $568 billion by the end of 2002, compared with $492 billion the previous year. It grew at an annualized rate of 28% during the fourth quarter from the third quarter’s $531 billion.

Total participation certificates (PCs) grew to $1.082 trillion during 2002 from the previous year’s $948 billion. Total PCs grew at a 9% annualized rate during the fourth quarter from third quarter’s $1.058 trillion. Total PCs net, which excludes PCs held in the retained portfolio, reached $743 billion during 2002 and $781 billion during the fourth quarter.

Freddie said its average monthly duration gap ranged between plus and minus one month for each month during 2002.

Freddie said it expects to restate financial results for 2002, 2001 and possibly 2000, materially increasing earnings. The company noted that reported financial results will change when the new auditor, PricewaterhouseCoopers, finishes its first full-year audit and re-audit. Pricewaterhouse replaced Arthur Anderson in March 2002, and Freddie said in some instances, the application of SFAS 133 (accounting for derivative instruments) and SFAS 115 (classification of mortgage assets between available-for-sale and trading accounts through certain resecuritization transactions) were not consistent with generally accepted accounting principles.

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