Freddie Mac 4Q Loss Widens On Investment, Credit Losses

   DOW JONES NEWSWIRES 
 

Mortgage giant Freddie Mac's (FRE) fourth-quarter net loss widened sharply on surging investment and credit losses, bringing its loss for the year to $50.1 billion as the company warned that funding from the U.S. Treasury may not be enough to keep it solvent.

Still, Freddie's loss narrowed from the third quarter as it also requested an additional $30.8 billion under the Treasury's Senior Preferred Stock Purchase Agreement to eliminate its stockholders deficit. It expects to receive those funds this month.

The Treasury Department boosted its pledge last month to $200 billion each for Freddie and Fannie after they were put under conservatorship in September to prevent their potential bankruptcy. Freddie has already gotten $13.8 billion.

For the latest period, Freddie posted a net loss of $23.9 billion, or $7.37 a share, compared with a year-earlier net loss of $2.5 billion, or $3.97 a share.

The latest results included $13.3 billion in net mark-to-market losses on the company's derivatives portfolio and $7.2 billion in credit-related expenses. Results were also hurt by $7.5 billion in security impairments on available-for-sale securities.

Freddie also recognized an $8.3 billion valuation allowance against its net deferred tax assets in the period.

The company posted negative revenue of $15.8 billion, compared with negative $678 million a year earlier.

"Freddie Mac is working hard to serve our expanded mission in this historic crisis, by doing all we can to help stabilize the financial markets and hasten the recovery in housing," Moffett said.

Freddie's red ink comes on top of a $25.2 billion loss reported by Fannie Mae (FNM) late last month. Both firms have temporarily halted all foreclosure sales and evictions to give loan servicers more time to help borrowers avoid foreclosure. Freddie extended its suspension of eviction notices last week through April 1.

Freddie named John A. Koskinen interim Chief Executive Wednesday, effective upon the resignation of David Moffett, who said last week he will resign no later than Friday, as he wants to return to a role in the financial-services sector. Moffett took over as CEO in September amid the conservatorship. Before that, he served as chief financial officer at U.S. Bancorp. (USB).

Freddie also said last month it would begin using third-party services that specialize in servicing Alt-A and other types of higher-risk mortgages to advise homeowners in another effort to keep at-risk borrowers in their homes.

Freddie's shares were up 2.4% at 43 cents in after-hours trading from the close of 42 cents.A New York Stock Exchange move to lower minimum market-capitalization requirements and minimum trading prices for listed companies has kept Freddie's stock from being delisted for falling below $1, as it warned in November. The shares have fallen 99% in the last year.

-By Kerry E. Grace and Lauren Pollock, Dow Jones Newswires; 201-938-5089; [e-mail]