Freddie Mac Reports Increase in Low-Income Housing Tax Credit Partnerships in 2009

Freddie Mac, which just released its fourth quarter and full-year 2009 results, reported a net loss of $21.6 billion in 2009, compared to a net loss of $50.1 billion in 2008. For the quarter ending December 31, its net losses were $6.5 billion compared to $5.4 billion for the quarter ending September 30, 2009.

Although Freddie mac helped to finance 253,000 units of multifamily rental housing, as well as approximately 2.2 million single-family loans, its fourth quarter and full-year results were negatively impacted by $7.1 billion and $29.8 billion in credit-related expenses, respectively. Freddie Mac partly attributed the results to challenging economic times.

In addition, fourth quarter and full-year 2009 were affected by $3.4 billion and $4.2 billion in LIHTC partnerships expense, respectively. This was primarily due to the write-down of the carrying value of the company’s LIHTC partnerhship investments to zero as of December 31, 2009. On February 18, 2010, after consultation with Treasury and consistent with the terms of the Purchase Agreement, the Federal Housing Finance Agency (FHFA) informed Freddie Mac the company could not sell or transfer the assets and that FHFA sees no other disposition options. That is why Freddie Mac wrote down the carrying value of its investments to zero. This write-down increases the likelihood that the company will require additional draws from Treasury under the Purchase Agreement.

On a cautious note, Freddie Mac CEO Charles E. Haldeman, Jr., said: “We start 2010 with some early signs of stabilization in the housing market,” but he anticipates the housing recovery to remain fragile, “with significant downside risk posed by high unemployment and a potential large wave of foreclosures.”