Freddie: Bigger loss, no new bailout

By Chris Isidore, senior writer


NEW YORK (CNNMoney.com) -- Government-owned mortgage financing firm Freddie Mac reported a larger loss in the fourth quarter, but the company did not need to draw down any additional tax dollars in the period.

The company, which along with rival Fannie Mae (FNM, Fortune 500) was put into a conservatorship under government control in September 2008, lost $6.5 billion in the quarter, up from a loss of $5.4 billion in the third quarter.

Including $1.3 billion in preferred dividend payments to the federal government, the loss came to $7.8 billion in the fourth quarter of 2009. But that's still much better than the $23.9 billion it lost in the year-earlier period.

The company lost $21.6 billion for the year, an improvement from 2008 losses of $50.1 billion.

Freddie charged off $2.4 billion in bad loans during the quarter, nearly triple the $863 million from a year earlier. That brought full-year charge-offs to $7.6 billion in 2009.

And the worst is clearly not behind it, as Freddie raised its reserves for loan losses to $33.9 billion at the end of the quarter, up from $30.6 billion three months earlier.

About 3.9% of its $1.9 trillion in loans are now delinquent, well below the national average for late payments. But Freddie's delinquency rate has been rising steadily for the past two years.

Freddie (FRE, Fortune 500) said it ended the quarter with a positive net worth of $4.4 billion, which means that for the third straight quarter it did not need another injection of government cash. Net worth compares a company's assets to the value of its liabilities.

A year ago Freddie needed $30.8 billion in federal cash as mounting foreclosures on the mortgages Freddie owns or guarantees hurt the company's finances. Since the start of the conservatorship, Freddie has received $50.7 billion in taxpayer dollars, while Fannie has received $60.9 billion.

That injection of tax money to keep the companies afloat gave the Treasury Department an 80% stake in both companies. Fannie and Freddie both pay dividends to Treasury. Freddie has paid $4.2 billion so far.

But despite those dividends, future injections of taxpayer dollars are likely. At the end of the fourth quarter, Treasury lifted a $200 billion limit on the amount of money it could pour into each of the firms.

Fannie and Freddie are the primary source of mortgage funding in the nation. They bundle home loans that conform to certain standards into securities, attach a guarantee that they will be paid, and sell them to investors. The process gets money back to the banks and other lenders that originate the loans.

Freddie, which has about $1.9 trillion in its loan portfolio, purchased or guaranteed approximately one out of every four U.S. home loans originated during 2009. To top of page

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