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Freddie seeks gov't aid after $25.3B loss
2008-11-14
WASHINGTON - Mortgage finance company Freddie Mac is asking for $13.8 billion out of a potential $100 billion in government aid after posting a massive quarterly loss. The McLean, Va.-based company, seized by federal regulators more than two months ago, said it expects to receive the money by Nov. 29. Freddie Mac posted a loss Friday of $25.3 billion, or $19.44 per share, for the third quarter. The results compare with a loss of $1.2 billion, or $2.07 a share, in the year-ago period. Analysts were looking for a loss of 89 cents per share for the latest quarter, according to Thomson Reuters. The loss was mainly due to a $14.3 billion charge to reduce the value of tax assets, but also was driven by $9.1 billion in writedowns on mortgage securities, and $6 billion in credit losses due to soaring mortgage delinquency rates and foreclosures. Freddie Mac said that rising unemployment rates, tightening credit and deteriorating economic conditions "contributed to a substantial increase in the number of delinquent loans," including prime loans made to borrowers with strong credit. "Continuing home price declines and growing unemployment are now affecting behavior by a broader segment of mortgage borrowers," the company said in a Securities and Exchange Commission filing. Freddie Mac's overall delinquency rate rose to 1.22 percent, from 0.9 percent at the end of June and 0.5 percent a year earlier. The number of foreclosed properties that Freddie Mac holds rose to 28,000, from 22,000 in June. On Monday, sibling company Fannie Mae posted $29 billion loss in the third quarter as it took a massive tax-related charge. While Fannie Mae said it may have to tap the government's for help in the coming months, it has not yet done so. Fannie Mae and Freddie Mac, which own or guarantee around half of the $11.5 trillion in U.S. outstanding home loan debt, operate in a conservatorship that enables the government to inject up to $100 billion in each company in exchange for ownership stakes of almost 80 percent. They also are facing a federal grand jury investigation into their accounting practices. Both Fannie and Freddie have changed their accounting for their deferred-tax assets, which can emerge from operating losses, and can be used to reduce future tax expenses. Companies must be able to show they will be profitable if they intend to use the tax assets for earnings in later periods. Freddie Mac's net worth -- the value of its assets minus the value of its liabilities -- fell to negative $13.8 billion at the end of September, which forced the company to ask for government help.
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 Fannie, Freddie execs turned aside warnings (2008-12-09) | | Former Fannie Mae, Freddie Mac execs to testify (2008-12-09) |  Freddie seeks gov't aid after $25.3B loss (2008-11-14) | | Fannie Mae posts $29B loss, may tap gov't funding (2008-11-10) | | Fannie, Freddie disclose subpoenas, investigations (2008-09-29) | | With finance crisis, hands-off era over (2008-09-17) | | Lehman: The next bailout? (2008-09-13) | | Fannie, Freddie rescue binds taxpayers to housing market (2008-09-09) | | Congress weighs the fate of Fannie, Freddie (2008-09-09) | | Mortgage rates drop after Fannie, Freddie takeover (2008-09-08) | | Fannie and Freddie: why the takeover (2008-09-08) | | Fannie, Freddie deal helps some borrowers, not all (2008-09-08) | | World stocks surge on US mortgage rescue plan (2008-09-08) | | Wall Street soars on Fannie, Freddie bailout (2008-09-08) | | China and Japan hail U.S. mortgage rescue as doubts linger (2008-09-08) | | US government takes on big role in mortgage market (2008-09-08) | | World stocks soar after Freddie, Fannie bailouts (2008-09-08) | | US Government seizes control of mortgage giants (2008-09-07) | | Battered stocks face another tough week (2008-09-07) | | US takes over Fannie, Freddie in bid to ease finance crisis (2008-09-07) | | Obama: Recession could delay rescinding tax cuts (2008-09-07) | | Candidates weigh in on stabilizing Fannie, Freddie (2008-09-06) | | Government may soon back troubled mortgage giants (2008-09-06) | | McCain backs government takeover of mortgage giants (2008-09-06) | | Fannie, Freddie blind to the bubble (2008-09-06) |
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