Freddie Mac Seeks $1.5 Billion From Taxpayers

Tuesday, 09 Aug 2011 12:34 AM

 

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Mortgage finance giant Freddie Mac said it would need to ask for an additional $1.5 billion from taxpayers due to losses stemming from weak housing markets.

The company reported a comprehensive loss in the second quarter of $1.1 billion. Despite income of $1 billion, the company registered a net worth deficit of $1.5 billion.

That is in part because it was required to pay dividends worth $1.6 billion to the Treasury. As a result, the cost to taxpayers of its rescue declined by $100 million this quarter.

Freddie Mac has drawn $65.2 billion from the government since it was taken over at the height of the financial crisis in September of 2008.

Because of dividend payments, the net cost of Freddie Mac's rescue peaked at $56.2 billion in the second quarter of last year. In the most recent quarter, the cost eased to $52 billion.

Freddie Mac said it expects home prices to decline in the near term, and that it expects its credit losses to remain elevated in the second half of the year.

Labor market weakness and households' worries about their financial security dampened home sales during the quarter, Freddie Mac chief executive Charles Haldeman said.

"While we expect some improvement in home sales during the second half of the year, our outlook for the single-family housing market remains cautious," he said.

Fellow mortgage finance provider Fannie Mae said last week it will ask for an additional $5.1 billion from taxpayers. It reported a second quarter loss attributable to common shareholders of $5.2 billion or 90 cents a share.

The government seized control of both firms almost three years ago as losses piled up from mortgages gone bad.

The administration and Congress are considering ways to restructure the two enterprises, which despite their financial woes are central to U.S. housing finance. The issue is highly contentious politically and lawmakers are not expected to take up the matter for several more months.

Ratings agency Standard & Poor's on Monday downgraded the debt issued by the firms to AA-plus from AAA, the highest level, following their weakening of the U.S. government's credit rating last week.

© 2014 Thomson/Reuters. All rights reserved.

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