Freddie Mac seeks more aid; posts $6 billion loss

By Associated Press
Posted Aug. 9, 2010 at 10:44 a.m.

Government-controlled mortgage buyer Freddie Mac is asking for $1.8 billion in additional federal aid after posting a larger loss in the second quarter.

Freddie Mac said Monday it lost $6 billion, or $1.85 per share, in the April-to-June period. The company is required to pay a 10 percent annual dividend to the Treasury Department on money it has received from the government. That made up $1.3 billion of the company’s second-quarter losses.

The company lost $840 million, or 26 cents a share, in the same quarter last year.

The government rescued McLean, Va.-based Freddie Mac and sibling company Fannie Mae from the brink of failure nearly two years ago. The new request means they have needed $148.2 billion to stay afloat, about $63.1 billion of which is being used by Freddie Mac.

Freddie Mac is losing money from bad loans it backed, many of them before the housing market went bust. It had $118 billion in bad loans at the end of June, up from $103.4 billion at the end of last year. It owned more than 62,000 foreclosed properties in June, up from about 35,000 a year earlier.

Both Fannie Mae and Freddie Mac have both lost tens of billions of dollars during the past two years and both are asking the government to prop them up. Last week, Fannie Mae requested $1.5 billion after posting a loss of $3.13 billion, or 55 cents per share, in the second quarter.

Still, the two companies are taking different approaches to their situations. Fannie Mae sounded optimistic about its future. Freddie Mac offered a more tempered view.

“We recognize that high unemployment and other factors still pose very real challenges for the housing market,” CEO Charles Haldeman said in a statement. “With that in mind, we continue to focus on the quality of the new business we are adding to our book to be responsible stewards of taxpayer funds.”

Fannie and Freddie own or guarantee about half of all U.S. mortgages, or nearly 31 million home loans worth more than $5 trillion. They buy home loans from lenders, package them into bonds with a guarantee against default and sell them to investors.

During the housing boom, Fannie and Freddie faced political pressure to expand homeownership and competitive pressure from Wall Street to back ever-riskier loans. When the market went bust, defaults and foreclosures piled up, and the government had to take them over.

Over the next year, lawmakers plan to review the nation’s mortgage-lending system and consider a potential replacement for Fannie Mae and Freddie Mac. The financial overhaul signed by President Barack Obama didn’t address that issue, despite protests from Republicans that it was incomplete without a such a plan. The administration is holding a public conference on Aug. 17 in Washington to discuss the mortgage system.

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  1. Anne Aug. 9, 2010 at 10:58 a.m.

    Barney Frank to the rescue!!

  2. rj Chicago Aug. 9, 2010 at 12:15 pm

    This is nothing but a zombie institution and from what I continue to read the root of the continuing failure of the housing market and industry in the USA. This thing needs to be fixed permanently or let it fail for good.

  3. clarence Aug. 9, 2010 at 12:30 pm

    Why is Obama letting these two bankrupt companies continue to exist? Obama bailed out GM because Obama wanted to help out the unions. What does Fannie and Freddie have over Obama? Will someone shot Fannie and Freddie like they were a horse with a broken leg? Both organizations are taking tax payer dollers in the billions with no intention of paying back, just like GM which still owes 50 billion. 148 billion has been pumped into these two completely mismanged companies, and Obama wants to give them more? How sad for the American taxpayer.

  4. dr. house Aug. 9, 2010 at 3:42 pm

    Fannie and Freddie are another example of ‘good thought, not really feasible’ policy. Do you really need to own a home to have a good life/standard of living? Is it wrong that you can’t come up with 20% down payment (about $40K based on local median prices) that you want to then sink in a house? We tried getting people in homes (good idea), but too many people found loopholes to abuse it (correct for many econ problems today). Time to wind down Freddie and Fannie and let people buy houses who want to and can do it. Prior to WWII, people paid cash for their homes because they 1) saved and 2) homes weren’t valued as they are today.