Freddie Takes Loss But It Doesn't Call for More Treasury Capital

Freddie Mac, which continues to mark down the value of its mortgage assets, lost $6.5 billion in the fourth quarter but will not need fresh capital from the U.S. Treasury. At yearend its loss reserves increased to $33.9 billion, more than double what it had set aside 12 months earlier. In releasing its quarterly and full-year results, the GSE also revealed that it found two errors in how it calculates loss severity rates that would have made its results look better. It said that by fixing its calculations these changes would have been "material" to its earnings. The national mortgage delinquency crisis continued to hammer its bottom line in the 4Q with the GSE reporting total credit losses of $7 billion, a modest improvement over 4Q08 when it had CLs of $8 billion. However, when it comes to operating results that come from management and guarantee fees, Freddie earned $743 million in the fourth quarter, an 8% decline from the third quarter. The government-controlled company also revealed that the delinquency rate on its structured bonds increased to 3.87% at yearend from 3.33% three months earlier. Despite all its problems, the company still has a positive net worth of $4.4 billion, but to date Freddie has received $51 billion in aid from the Treasury. The company lost $21.6 billion for all of 2009, excluding dividends paid to the government. In 2008 it lost $50.1 billion. Fannie Mae is scheduled to report its results on Friday. Late last year, the White House said it would cover unlimited losses on the GSEs over the next three years, removing a previous ceiling of $400 billion.