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Freddie Mac posts $3bn 2007 loss Freddie Mac posts $3bn 2007 loss
(about 1 hour later)
The deepening crisis in the US housing market has caused huge losses at Freddie Mac, the second biggest provider of US mortgage financing.The deepening crisis in the US housing market has caused huge losses at Freddie Mac, the second biggest provider of US mortgage financing.
The firm posted a $3bn (£1.5bn) net loss for last year, compared with net income of $2.3bn in the previous year.The firm posted a $3bn (£1.5bn) net loss for last year, compared with net income of $2.3bn in the previous year.
It said it was "extremely cautious" about the sector's prospects in 2008 and is preparing for worse to come.It said it was "extremely cautious" about the sector's prospects in 2008 and is preparing for worse to come.
House prices are falling in the US and many homeowners are struggling to pay their mortgages and face repossession.House prices are falling in the US and many homeowners are struggling to pay their mortgages and face repossession.
"Today's economy represents one of the most severe housing downturns in American history," said Richard F. Syron, Freddie Mac chairman and chief executive. Today's economy represents one of the most severe housing downturns in American history Richard F. Syron, Freddie Mac boss
Rival lender Fannie Mae reported an annual 2007 loss of $2bn on Wednesday. Freddie Mac and rival, Fannie Mae avoided financing loans made to buyers with poor credit histories - so called sub-prime loans.
Both Freddie Mac and Fannie Mae avoided financing loans made to buyers with poor credit histories - so called sub-prime loans.
But the deepening crisis has spread to more credit worthy homeowners too.But the deepening crisis has spread to more credit worthy homeowners too.
The number of US homeowners entering the repossession process jumped by 75% in January from the previous year, according to research firm RealtyTrac.
See map of highest US repossession rates
"Today's economy represents one of the most severe housing downturns in American history," said Richard F. Syron, Freddie Mac chairman and chief executive.
The firm's losses for the last three months to the end of December 2007 were greater than expected at $2.5bn as rising home loan defaults deflated the value of its portfolio of mortgage securities.
Affordable homes
It was also forced to set aside $912m in reserves to cover its guarantees of payments on bonds held by investors to cover further losses.
In November, Freddie Mac sold $6bn of shares to shore up its balance sheet and said it was cutting its dividend for the last three months of 2007 to 25 cents per share, half of what it had been the previous quarter.
The Virginia-based firm was set up with Fannie Mae in the 1970s by Congress to make home ownership more affordable.
They have since been privatised but are considered government-sponsored organisations because investors believe the government would bail them out in a crisis.
1. Detroit, MI 2. Stockton, CA 3. Las Vegas, NV4. Riverside--San Bernardino, CA 5. Sacramento, CA 6. Cleveland, OH7. Bakersfield, CA8. Miami, FL 9. Denver-Aurora, CO10. Fort Lauderdale, FL Source: RealtyTrac
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