DOW JONES NEWSWIRES
Mortgage giant Freddie Mac's (FRE) first-quarter loss widened on
higher credit-related expenses and another $7.1 billion in loan
write-downs, though the red ink narrowed sharply from the $23.9
billion loss posted in the fourth quarter.
"This was another difficult quarter for Freddie Mac, as
declining home prices and the weak economy continued to take a toll
on our results," said interim Chief Executive John Koskinen. "While
we expect the coming quarters to be difficult, we are seeing
preliminary signs of slowing in home price declines as low mortgage
rates and high affordability take hold."
Freddie and rival Fannie Mae (FNM), which were put under
government conservatorship in September to prevent their potential
bankruptcy, have been buoyed by massive government investments but
have still been posting huge losses because of credit
provisions.
Freddie posted a loss of $9.85 billion, or $3.14 a share,
compared with a year-earlier loss of $151 million, or 66 cents a
share.
The latest results included $7.1 billion in write-downs on
securities held for sale, similar to the fourth quarter's $7.5
billion, and $9.1 billion in credit-related expenses, which were
partially offset by net mark-to-market gains of $3.8 billion on the
company's derivatives portfolio. In the year-earlier period,
credit-related expenses were $1.45 billion.
The company also took a $3.1 billion write-down in the latest
quarter on its deferred tax assets. They can be used to offset
future profits, but expire after a certain period.
Revenue dropped 45% to $771 million.
Credit-loss provisions jumped to $8.8 billion from $7 billion in
the fourth quarter amid continued credit deterioration in the
company's single-family mortgage portfolio.
Freddie's red ink comes on top of a $23.2 billion loss posted by
Fannie Mae (FNM) last week. Fannie had $20.3 billion in credit-loss
provisions and requested another $19 billion in government funds
last week, which if approved through a preferred-stock purchase
would put the total given by the government at $34.2 billion.
Freddie and Fannie's regulator, the Federal Housing Finance
Agency, said in March it was looking at ways the two companies
could help finance small mortgage banks and revive the market for
loans made to such banks. The possible role is the latest sign of
how they are being used increasingly as instruments of government
policy rather than companies focused on shareholder returns.
Freddie's shares rose a penny in after-hours trading to 86
cents. The stock traded as high as $27.95 last May.
-By Kerry E. Grace and Lauren Pollock, Dow Jones Newswires;
201-938-5964; lauren.pollock@dowjones.com