Mortgage secondary market giant Freddie Mac lost $480 million (under generally accepted accounting principles) in the fourth quarter as losses in the market value of derivatives and the company's credit guarantee portfolio offset interest income and guarantee fee income.For the full year, Freddie Mac earned net income of $2.2 billion, up from $2.1 billion in 2005. Freddie attributed the fourth-quarter loss to a widening of option-adjusted spreads and to credit deterioration on its guaranteed loan obligation. The company's "fair-value" results, designed to strip out the volatility associated with mark-to-market changes in the value of derivatives, also weakened in the fourth quarter, with the value of net assets attributable to common shareholders declining by $200 million. However, the company said that fair value increased by $2.5 billion for the year as a whole. In a conference call with investors and analysts, chairman and chief executive Richard Syron noted that in 2006, both net income and fair value before capital transactions exceeded $2 billion, attributing the increase to growth in Freddie Mac's credit guarantee business. Investors reacted calmly to the news, with Freddie's share price edging up slightly in the hours after the data were released.
