Overall, our business performed well. We were successful in improving our position with customers, meeting extraordinary mission demands, and strengthening our capital position and balance sheet. We grew our mortgage portfolio and our share of the market. At the same time, we kept our interest-rate and credit risks exceptionally low. These were all major accomplishments, given rising interest rates and diverse challenges that included increased competition, diminished housing affordability, and widespread storm devastation along the Gulf Coast.
No less important, we provided more support for affordable housing than ever before. And we made this key aspect of our broad mission part of the everyday flow of our business.
When the Gulf hurricanes struck, Freddie Mac demonstrated the kind of leadership and market influence that sets us apart as a government-sponsored enterprise, or GSE. By moving quickly to provide relief to affected homeowners and mortgage servicers — and taking the lead by investing in state and local mortgage revenue bonds — we helped bring stability and hope to the affected region. Although we are a large, national company, our actions in the Gulf region made a real difference, at the local level, for thousands of struggling families and individuals.
These and other steps underscore our capacity and commitment to help protect homeowners, the housing sector and the economy from the shock of unexpected events. They demonstrate once again how we serve our congressional charter both in good times and in times of crisis.
While the year brought reason for pride, it also brought some disappointment. None of us was satisfied with the company’s progress in financial reporting, where we met some of our targets, but fell short of others. This is an area in which we are accelerating our efforts this year, as we focus on a number of internal controls and infrastructure upgrades.
In this and many other ways, Freddie Mac’s transformation continues. Let me detail some of the progress we have made:
Even in the face of a challenging financial environment and a competitive secondary market, our business remained strong in 2005.
Freddie Mac’s portfolio of issued mortgage securities grew by 10.5 percent and our retained portfolio grew by 8.7 percent. In a robust mortgage market, these were both significant improvements over 2004. Together, they brought our growth almost in line with that of the overall mortgage market. We achieved this healthy growth by executing on our underlying franchise strengths of excellent credit and interest-rate risk management and low debt funding costs.
We met the market’s changing needs by improving our ability to purchase non-traditional mortgage products and making core improvements in our business operations. We also took major steps forward in such areas as customer satisfaction and market share.
Our focus on the customer continued to bear fruit. For instance, we cut in half the time it took to get a customer contract. We also expanded our mortgage product line and launched new types of securities (such as the Reference REMIC and whole-loan REMICs). Foreign investors were particularly attracted to these securities — thus continuing our “insourcing” of low-cost global funds to support the U.S. housing market.
Not only did we gain substantial GSE market share, but in the face of stiff competition from the banking sector, we also grew overall market share. And we diversified our customer base by reaching beyond our usual largest customers.