Freddie Mac posts huge lossNovember 4th, 2011 - 2:10 pm ICT by IANS
Washington, Nov 4 (IANS) Freddie Mac, one of the two major US mortgage-finance companies, said Thursday that it posted a net loss of $4.4 billion in the third quarter, more than twice as much as the loss in the previous quarter, and that it would request a $6 billion aid from the Treasury Department.
The mortgage giant, confronted with a weak housing market and substantial losses on derivatives, planned to draw a cash lifeline to offset the deficit of $6 billion. It will increase the aggregate government support funding to $72.2 billion, reported Xinhua.
The main reason for the increased net loss reflected the impact of further declines in long-term interest rates, said Freddie Mac in the financial report. The long-term interest rates declined by approximately 125 basis points in the third quarter, compared to a decrease of about 30 basis points in the second quarter.
The Federal Housing Finance Agency (FHFA), along with Fannie Mae and Freddie Mac, outlined a series of changes to the Home Affordable Refinance Program (HARP) in October, to save homeowners’ money by refinancing their mortgage loans with the current lower interest rates.
“The weak labour market and fragile economy continue to weigh heavily on the single-family market, causing many potential buyers to sit on the sidelines or opt to rent despite high affordability and record low mortgage rates,” said Freddie Mac Chief Executive Officer Charles E. Haldeman, Jr.
The company funded one in every four single-family homes and helped nearly 165,000 borrowers avoid foreclosure in the first nine months of 2011, including approximately 48,000 during the third quarter.
The company also paid a quarterly dividend of $1.6 billion to the Treasury as prescribed in Senior Preferred Stock Purchase Agreement, matching the previous quarter.
Freddie Mac and Fannie Mae have survived on Treasury aid since September 2008, when they were put under conservatorship by the federal government after the collapse of the subprime mortgage market.
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