Freddie Mac expects the shakeout in the mortgage industry to fuel substantial growth and a return to profitability for government-sponsored mortgage financiers, the company's chief financial officer said in a presentation Tuesday.
Buddy Piszel, in a speech at a financial services conference in London, said Freddie Mac expects 15 percent to 20 percent revenue growth this year.
The shocks and illiquidity in the mortgage market have pushed most of the independent players out. This leaves more room for government-sponsored enterprises _ or companies created by Congress to buy mortgage debt _ like Freddie Mac.
Freddie Mac buys home loans from banks and lenders, packages the loans into bonds, and sells the bonds to investors. Because investors assume Freddie Mac's Congressional charter means the government would not let Freddie Mac default, these bonds trade at high prices. This enables Freddie Mac to raise money more cheaply than other banks and lenders.
With the decay of credit quality and the exodus of money from the mortgage industry that began last year, many of the biggest mortgage lenders have scaled back their businesses or shut down entirely.
Freddie Mac and its fellow GSE Fannie Mae are now financing more than 80 percent of all mortgages in the U.S., up from 40 percent a year ago.
As lenders rely on Freddie Mac to buy their loans, the company is charging higher prices and increasing market share. Freddie Mac, which has a $738 billion portfolio of mortgage bonds and guarantees $1.78 trillion in home loans, is raising prices next month for the fourth time.
"We are nearly the only game in town, and we think we are going to be able to enjoy that position for a number of years," Piszel said.
Freddie Mac lost more than $3 billion last year because more missed payments on home loans dented the value of the company's investments.
Piszel said the credit quality of loans issued this year has proved much stronger than loans issued last year, and that bodes well for the new business Freddie Mac is picking up.
The company expects credit costs to continue swelling this year, but eventually costs will "come down on the other side," he said.
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