Fannie Mae Net Commitments To Buy Up $11.7 Billion In Dec

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; [e-mail]

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