Early Briefing: Foreclosures and Freddie Mac


Real estate agents Beth Doman and her son, Joe, show a foreclosed home in Ashburn that originally sold for $1.2 million. It is on the market for $850,000. (By Michael Temchine For The Washington Post)

*Once-popular and riskier mortgages, such as adjustable-rate and interest-only, are beginning to take their toll on affluent neighborhoods, economists and real estate agents said, leading to an increase in foreclosures. The consequences are being seen in places such as Loudoun County, where the rapidly expanding population and income levels meant razing dairy farms for new subdivisions over the past two decades, as well as Fairfax and Montgomery counties, where new subdivisions proliferated and demand drove up prices.

One in every 519 U.S. households received a foreclosure filing in April, according to RealtyTrac, an online directory of foreclosed properties.

*And problems in the housing market took an increasing toll on Freddie Mac during the first quarter, but accounting changes obscured the blow.

The giant mortgage funding company, a bellwether of market conditions, reported that it lost $151 million (66 cents per share) in the three-month period ended March 31, compared with a loss of $133 million (35 cents) in the first quarter of 2007.

However, those bottom-line numbers did not reflect the mounting cost of actual and anticipated losses from defaults, foreclosures and the like, known as credit-related expenses.

Freddie Mac reported $1.45 billion of credit-related expenses in the first quarter, up more than half from the previous quarter and more than fivefold from the first three months of last year.
If the company were forced to liquidate its holdings at current prices, it would have been left with a loss, based on a snapshot Freddie Mac provided of its assets and liabilities. The estimated asset value swung to negative $5.2 billion on March 31 from positive $12.6 billion on Dec. 31.

The hole could have been deeper: If not for changes in valuation methods, the March estimate would have sunk by $4.6 billion more.

*Montgomery County Council members voted to reduce the property tax rate by 2 cents per $100 of assessed value, but they left unresolved how such a move would affect homeowners and businesses. The council is racing to close a nearly $300million shortfall for the budget year that begins July1 and struggling to find the right mix of tax increases, spending trims and revisions to employee contracts.

On Wednesday, council members signaled that property owners will almost certainly be looking at higher taxes by the time work on the budget wraps up next week. How much more and how the burden will be divided between residential and commercial properties remains to be decided.

*Mayor Adrian M. Fenty announced Wednesday that the city is seeking bids for a master developer for the 50-acre site next to RFK Stadium known as Hill East, which includes the defunct D.C. General Hospital campus. Administration officials said they are seeking a mix of shops and housing and possibly a "healthplex" that would offer medical services.

The bidding for a developer closes in August, and about three months will be needed to review the proposals, project manager Jay Juergensen said. The administration will show the designs to the public and seek input, and a developer will be selected early next year, Juergensen said. The project is part of a larger effort to increase development along the long-neglected Anacostia River.

By Terri Rupar  |  May 15, 2008; 5:00 AM ET  | Category:  Morning Brief
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