Freddie's 2Q Earnings Drop 45%, Re: Bad Loans

Congressionally chartered mortgage giant Freddie Mac says its second-quarter earnings fell 45% to $764 million, blaming the performance on higher credit losses caused by rising loan foreclosures.In a statement, the company said the credit losses reflect "credit deterioration on 2006 and 2007 loan originations," citing "transition rates from delinquency to foreclosure and higher loan loss severities from slower home price appreciation and higher unpaid principal balances." Freddie's revenue was flat compared with that of a year earlier, but increased fourfold from revenue in the first quarter, a period in which Wall Street was still buying subprime loans. In the second quarter, many Street firms either stopped buying altogether or slowed their purchases to a trickle, sending lenders back into the conventional market. Even though Freddie's earnings fell in the quarter, its management and guarantee income increased 22% from that of the same period last year. After the earnings announcement, the company's stock had fallen approximately 4.5% as of midday Thursday. Freddie can be found online at http://www.freddiemac.com.