Freddie Mac Robs Us Again

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For background:

(Reuters) – Freddie Mac, the second-largest source of U.S. mortgage finance, said on Thursday it needed to borrow an extra $6 billion from the federal government as the shaky U.S. housing market resulted in its worst quarterly loss in more than a year.

The government-owned company said it lost $4.4 billion in the third quarter, a big increase from a $2.5 billion loss in the year-ago period.

Low sale prices on foreclosed homes in its inventory, low mortgage rates on its refinanced loans, and losses on derivative investments continued to drain cash from the lender that the government rescued in 2008.

The company warned of further weakness ahead as the pace of foreclosure sales picks up.

Freddie Mac has already drawn $72.2 billion in taxpayer funds and needs extra public money to cover its latest loss plus a $1.6 billion dividend payment to the U.S. Treasury.

The company and its larger rival Fannie Mae were seized by the government at the height of the financial crisis in 2008 as mortgage losses piled up, threatening their solvency.

Given the crucial role the two play in the U.S. housing finance system, owning or guaranteeing about half of all mortgages, the U.S. Treasury has seen them as too important to fail.

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Filed under Domestic Politics, Economy

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