Freddie Mac asks Treasury for $30.8 billion

The mortgage finance company needs more money after losing $50 billion last year.

Freddie Mac shares fetch just pennies in the wake of a government takeover last September.

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NEW YORK (Fortune) -- Freddie Mac, the government-backed mortgage finance company, said Wednesday it has asked the government for $30.8 billion in additional funding to close a gaping hole on its books.

The company, which has been majority-owned by taxpayers since a takeover last September, announced the funding request as it reported its sixth straight quarterly loss and shook up its executive suite.

Freddie (FRE, Fortune 500) lost $23.9 billion, or $7.37 a share, for the fourth quarter, reflecting rising credit losses and mark-to-market writedowns on the derivatives the company uses to hedge its interest rate risk. That compares with a year-ago loss of $2.5 billion, or $3.97 a share.

The company lost $50.1 billion, or $34.60 a share, in 2008. Nearly the entire loss came in the second half of the year, following the government's takeover of Freddie and its larger mortgage-finance sibling, Fannie Mae (FNM, Fortune 500), in hopes of stabilizing the housing market.

Executives said the company's losses deepened as the housing market continued its decline, but added that the funds the company provides to mortgage lenders via its purchase or guarantee of mortgages was helping to stem the bleeding.

"Freddie Mac is working hard to serve our expanded mission in this historic crisis, by doing all we can to help stabilize the financial markets and hasten the recovery in housing," the company said in a statement. "We absorbed heavy financial losses last year, driven primarily by mark-to-market items and credit-related expenses. But we also provided vital liquidity to the strapped housing market -- injecting more than $460 billion in mortgage funding in 2008."

Earlier Wednesday, Freddie named John A. Koskinen interim chief executive and Robert R. Glauber interim nonexecutive chairman. The move came just over a week after Freddie's CEO, David Moffett, said he would step down after only six months on the job.

Moffett was installed as CEO last September when the government took Freddie and Fannie into conservatorship. That move, made Sept. 7 by then Treasury Secretary Henry Paulson, wiped out the companies' preferred shareholders and gave taxpayers a 79% stake in the government-sponsored enterprises.

The government takeover came after Paulson had spent months trying to soothe the frayed nerves of investors who were worried about deepening losses tied to the home mortgages the companies guarantee or purchase for their own portfolios.

Last July, Paulson asked Congress to appropriate $200 billion for standing Treasury credit lines for the companies, which own or guarantee half of U.S. home mortgages.

Paulson promised legislators neither Fannie nor Freddie would need to draw down the credit lines, saying that granting the credit line was like giving the Treasury secretary a bazooka that would deter speculative attacks on the companies.

But since then, both companies have been forced to draw on the credit lines to fund continued mortgage purchases and guarantee activity. Freddie had already drawn down $14 billion of its credit line heading into Wednesday's announcement. Fannie said last month it would draw down $15 billion of its own credit line after the company posted a $59 billion loss for 2008.

Freddie said the credit line drawdown - which comes in the form of an increase in the value of the government's preferred stock position in the company - will entitle taxpayers to $4.6 billion in annual cash dividends from Freddie. The company said it paid its first dividend to Treasury in December.

The nearly $31 billion infusion from Treasury will serve to close the gap between Freddie's assets and liabilities -- also known as shareholder equity, a measure of the company's net worth.

Freddie's net worth by that metric was negative $30.7 billion at the end of 2008. The company's shares, which fetched as much as $34 a year ago and traded as high as $67 before the credit markets seized up in mid-2007, closed Wednesday unchanged at 42 cents.