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Freddie Mac loss swells as mortgage crisis deepens 29.02.2008 |
Freddie Mac, the second-biggest provider of U.S. residential mortgage funding, said on Thursday its loss widened to a record $2.5 billion in the fourth quarter as the housing crisis worsened.
A sharper-than-expected drop in home prices that first sparked a crisis in subprime lending last summer has since tainted all types of mortgages, hurting Freddie Mac's and rival Fannie Mae's ability to support the housing market. Fannie Mae said on Wednesday it posted a $3.6 billion loss.
But in a sign financial markets thought the worst news may be behind both companies, their share prices, which have been battered in recent months, rose more than four percent on Thursday.
As the housing crisis worsened, rising delinquencies and foreclosures have forced the companies to write down the values of mortgage securities they own and boost reserves to cover their guarantees of payment on bonds held by investors.
Losses led the companies to sell $13.8 billion in preferred stock last quarter to boost capital needed for growth.
"Freddie Mac's ability to maneuver in 2008 is severely limited after fourth quarter results ate through almost one-half the preferred capital raised during the period," Jim Vogel, a strategist at FTN Financial in Memphis, Tennessee, said in a note to clients.
Freddie Mac shares, which are down 23 percent this year, were up 4.4 percent at $26.20 by midmorning, while Fannie Mae's shares were up about 4.5 percent at $28.47. Freddie Mac's shares initially had dropped after the results.
Freddie Mac lost $3.97 per share in the fourth quarter -- far more than Wall Street analysts' expectations of a loss of $2.48 per share, according to Reuters Estimates.
The government-chartered company said its net loss increased from $401 million in the year-earlier period. It is coming off a $1.2 billion loss for the third quarter that was revised from $2 billion after an accounting change.
Reuters
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 Freddie Mac loss swells as mortgage crisis deepens
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