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Freddie Mac’s Quarterly Loss WidensFreddie Mac, the second-biggest provider of residential mortgage financing, said on Thursday that its loss widened to a record $2.5 billion in the fourth quarter as the housing crisis worsened. Freddie Mac and its larger rival, Fannie Mae, suffered from higher defaults on mortgages that the companies guarantee as home prices declined for the first time since the Depression. The company also warned that it expected to lose billions of dollars more as the housing slump deepens and more borrowers fall behind on payments. This week regulators loosened restrictions on the two government-chartered companies in hopes that they would be able to prop up real estate by holding down financing costs for a bigger pool of home buyers. The companies’ staggering losses and desire to protect their capital, however, have curbed their power to stabilize the housing market. Rather than using the capital to finance mortgages, they have been writing down the values of mortgage securities and increasing reserves. The cash is needed to cover guarantees of loans that were packaged into bonds and sold to investors. Losses led the companies to raise $13.8 billion through preferred stock sales last quarter. The company lost $3.97 a share in the fourth quarter — far more than Wall Street analysts’ expectations of a loss of $2.48 a share, according to Reuters Estimates. On Wednesday the federal regulator for Freddie Mac and Fannie Mae, the Office of Federal Housing Enterprise Oversight, lifted restrictions on the growth in the companies’ $1.4 trillion combined portfolios, giving them more flexibility. The agency also said it might ease a mandate to hold capital 30 percent in excess of their usual minimum. Tag CloudExternal InformationAdditional InformationRe:Framing: Media Innovations, Leaping From Lab to Screen...Wedded to Work, and in Dire Need of a Wife... Prices Are Lower, but Profit Is Up at Xerox... Square Feet: Counting on a Hotel to Make a Neighborhood Hot... Where Am I?News Main Page - Business - Freddie Mac’s Quarterly Loss Widens |
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