Freddie's Home Price Forecast Darkens

Freddie Mac officials on Wednesday said home price declines could be 25% worse than it had forecast just a few months ago. During the company's second-quarter earnings conference call, company chairman and chief executive Richard Syron said home values will fall 18% to 20% from "peak to trough," compared with a previous estimate of 15%. Mr. Syron added that, "We are now halfway through the peak-to-trough" declines. In tandem with its earnings, the government-sponsored enterprise said "default costs" on its $791 billion portfolio could range from a low of $16 billion to a high of $42 billion. During the conference call, Freddie chief financial officer Buddy Piszel said 90% of the "marks" the GSE is taking "will flow back to us." (Freddie took a $2.5 billion provision for credit losses in the second quarter, compared with $1.2 billion in the first quarter.) Freddie Mac's revenues increased 11% in the quarter to $1.7 billion, compared with those of the first quarter. Mr. Syron told analysts that the GSE "does not expect to draw upon" any of the federal borrowing permitted under the housing bailout bill recently signed by President Bush. Freddie Mac can be found online at http://www.freddiemac.com.