Freddie Earnings Plunge 88% on Expected Coronavirus Losses

(Bloomberg) -- Freddie Mac’s first-quarter net income plunged 88% to $173 million due to higher expected credit losses on loans amid the coronavirus pandemic.

The mortgage giant booked $1.1 billion of credit-related expenses in the quarter ended March 31, according to a statement released Thursday. Freddie said the earnings decline was also driven by losses on single-family home loans, which took a major hit from the virus.

The results are a stark turnaround from the first quarter of 2019, when McLean, Virgina based-Freddie reported net income of $1.41 billion. The company slipped 2.4% to $1.61 in New York trading as of 10:47 am. The shares have tumbled almost 50% since Feb. 20, when concerns starting rising that the virus would hammer the U.S. economy.

Other highlights in Freddie’s first-quarter results:

  • Freddie, which took a $1.2 billion provision for the potential of future credit losses, said the housing market is currently facing its greatest challenges in more than a decade.
  • With large parts of the U.S. economy shut down to fight the pandemic, the company said it expects home sales to fall significantly in the second quarter.
  • The pandemic’s impact on financial markets negatively affected the overall liquidity of Freddie’s portfolios.
  • Freddie, which has been under government control since the 2008 financial crisis, said that its holdings of less-liquid assets are likely to increase in future quarters as the company will likely purchase a higher amount of delinquent and modified loans out of its mortgage-backed security pools.

©2020 Bloomberg L.P.

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