Global Biz

Freddie Mac loses $929 million

(Agencies)
Updated: 2011-05-05 10:44

WASHINGTON - Mortgage finance giant Freddie Mac (FMCC.OB) on Wednesday said it lost just short of a billion dollars last quarter, though it did not ask taxpayers for more aid as the loss stemmed from interest payments to the government.

The second-largest US residential mortgage funds provider reported net loss attributable to common shareholders of $929 million in the first quarter, including a $1.6 billion payment to the government. Without that interest payment, Freddie Mac earned about $676 million in the first three months of the year.

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That's the first three month period since the second quarter of 2009 that the firm reported positive net income, excluding the interest payment, and stems from higher quality loans made in recent years.

The first-quarter loss, including the interest payment, represents about $0.29 per share.

Freddie Mac and its sister firm Fannie Mae (FNMA.OB) have taken more than $150 billion in taxpayer aid since they were seized by the government in late 2008.

Interest repayments to Treasury from the two firms have reduced their net taxpayer assistance to slightly more than $134 billion.

Freddie Mac said those interest payments would increasingly drive any need for future taxpayer assistance.

Asked if the government should rethink its requirement that it should have to pay 10 percent interest on its government aid, Freddie Mac chief financial officer Ross Kari told Reuters it is the cost of doing business.

"What we think doesn't matter," Kari said. The firms are effectively controlled by the Federal Housing Finance Agency.

Then-US Treasury Secretary Henry Paulson took control of Freddie Mac and Fannie Mae at the height of the financial crisis in September 2008 as losses mounted from mortgages gone bad.

The plan to put them into conservatorship was meant to be temporary, although it is likely to be years before a long-term replacement structure takes shape.

The two firms and the Federal Housing Administration back close to nine of ten new home loans now as private mortgage funding dried up in the wake of the financial crisis.