Freddie Mac Posts $2B Loss
Posted on: Tuesday, 20 November 2007, 21:00 CST
Freddie Mac, the No. 2 U.S. buyer and guarantor of home loans, posted a record $2 billion loss Tuesday and said it needs to raise fresh capital to stay afloat.
The government-sponsored enterprise also said it was seriously considering a 50 percent cut in its fourth-quarter dividend -- the first cut since becoming a public company in 1989.
The company said it expected its fourth-quarter results to mimic the current quarter, which would further erode its capital.
The third-quarter loss was mostly because the mortgage finance company, formally known as the Federal Home Loan Mortgage Corp., needed to set aside $1.2 billion to account for bad home loans, it said.
Chief Financial Officer Buddy Piszel told The Wall Street Journal the company would likely sell several billion dollars of preferred stock in the very near term.
Freddie Mac shares plummeted 28.69 percent, or $10.76, to close at $26.74 on the New York Stock Exchange. Shares of bigger sister rival Fannie Mae, which reported a $1.4 billion loss 11 days earlier, dropped 24.84 percent, or $9.33, to close at $28.25 on the NYSE.
Source: United Press International
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