Freddie Mac posts fourth consecutive loss

Source: Exec Digital USA

Date :8/6/2008 7:23:19 AM

Freddie Mac swung to a wider-than-expected second-quarter loss as stress in the housing and credit markets continued to weigh on its overall performance.

For the second quarter, Freddie Mac reported a loss of US$821 million, or US$1.63 cents per share, compared with a profit of US$729 million, or 96 cents per share, a year earlier.

This included the first loss from its holdings of subprime and other risky loans, which formed a significant part of its US$2.8 billion in realized and anticipated losses stemming from the US housing downturn.

This news caused shares in Freddie Mac to tumble more than 20 percent in premarket trades on Wednesday, August 6.

Economic slowdown

“While we expect continued housing and economic weakness will affect our overall performance this year, we continue to maintain a surplus over all regulatory capital requirements,” Freddie Mac said.

It also reaffirmed its commitment to raise US$5.5 billion of new capital and said it will evaluate raising capital beyond this amount 'depending on [its] needs and as market conditions.'

In addition, the mortgage giant plans to cut its third-quarter dividend to five cents from 25 cents and pay the full preferred dividend.