Freddie Mac Posts $8B Loss in 1Q’10

The mortgage funding giant Freddie Mac (FRE) said Wednesday that it lost $8 billion, or $2.45 per share, in the first quarter of the current fiscal year, reflecting $1.3 billion in senior preferred stock dividend payments to the U.S. Department of the Treasury.

1Q’10 results also reflect:

  • Provision for credit losses of $5.4 billion, down from $7.0 billion for the fourth quarter of 2009
  • Derivative losses of $4.7 billion due to the decline in long-term rates during the quarter; and
  • Net interest income of $4.1 billion.

The second-largest provider of U.S. home loan funding also said that its net worth deficit came in, as of  March 31, 2010, at $10.5 billion compared to a positive net worth of $4.4 billion in Dec. 31, 2009. Furthermore, the company, which during the quarter helped finance more than 390,000 single-family homes and 50,000 units of rental housing, warned that it would continue to need government funds because the housing market remains fragile.

FRE: “Our first quarter 2010 financial results were driven significantly by the required adoption of new accounting standards, along with continued weakness in the housing market,” said Ross J. Kari, Freddie Mac’s chief financial officer. “Upon adoption of the new accounting standards we added $1.5 trillion of assets and liabilities to our balance sheet, and the cumulative effect of these changes was a one-time net decrease of $11.7 billion to total equity. The impact on Freddie Mac was significant relative to others as the nature of our business model amplified the impact of these changes.

“Though we are encouraged by signs of modest stabilization in some trends on the credit side of our single-family business, given the many uncertainties in the economy, we remain cautious,” Kari said.

The latest report from the co. offers more evidence that the mortgage giant, which is chartered by the gov’t to keep money flowing to mortgage lenders, will not return to profitability soon.

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