Freddie Mac "Adjust" To Reality

if you can stand cheering news/pr like this feel free to click on the headline.... :-(

wenn ihr unfassbare pr lesen wollt braucht ihr nur auf die überschrift zu klicken....... :-(

"I'm particularly proud that our company took a leadership role in the subprime mortgage market, announcing new underwriting standards and products and committing to purchase up to $20 billion in mortgages to support subprime borrowers."

Freddie Mac (NYSE: FRE - News) today reported a net loss of $211 million, or $0.46 per diluted common share, in the first quarter of 2007, compared to net income of $2.0 billion, or $2.80 per diluted common share, for the same period in 2006. The company also reported a decline in fair value of net assets attributable to common stockholders, before capital transactions, of approximately $300 million in the first quarter of 2007, compared to an increase of $1.0 billion for the same period a year ago. The declines in net income and fair value results were primarily due to losses on mark-to-market items.
During the first quarter of 2007, the company recorded mark-to-market losses totaling $1.2 billion on items included in other non-interest income (loss), compared to a mark-to-market gain of $742 million in the first quarter of 2006

Credit-related expenses, consisting of provision (benefit) for credit losses and real estate owned (REO) operations expense, were $193 million in the first quarter of 2007, compared to $60 million in the first quarter of 2006. (up 221%)

Included in other non-interest expense are mark-to-market losses of $314 million compared to losses of $67 million in the first quarter of 2006. These increased losses reflect the impact of lower market prices on non-performing loans purchased out of guaranteed securities, as well as the impact of higher expected credit and other costs reflected in the market-based valuations of the guarantee obligation associated with new single-family mortgage securitizations.

A portion of these mark-to-market losses reflects market uncertainty in the pricing of mortgage credit at March 31, 2007, and accordingly implies higher credit losses than the company expects to ultimately incur.

>it will be interesting to see how the recent spike in yields will impact next quarter earnings

>ich bin gespannt wie sehr der zinsanstieg sich auf die nächsten quartalsergebnisse auswirken wird.

disclosure: short KBW Mortgage Finance Index (including FRE)

UPDATE:

Freddie Mac Q1 2007 Earnings Call Transcript http://tinyurl.com/ytvumy

PDF Slide Show Presentation http://tinyurl.com/yq6ue5