Freddie Mac Posts Record Loss
Government chartered Freddie Mac and Fannie Mae,
which account for 45% of the $11.5 trillion home loan market, are posting their biggest ever losses.
Freddie Mac, the 2nd largest mortgage finance company, posted a record $2.5 billion Q4 loss vs $2 billion in Q3; and a full year net loss of $3 billion.
Q4 loss of $2.5 billion was a 600% increase over the $401 million loss in the same quarter, a year ago.
This increase in loss resulted from significant mark-to-market losses in non interest income...
Other non interest income losses soared to $2 billion in Q4 from $601 million in Q3.
FHLMC reported writedowns and other non-interest expenses of $2.1 billion primarily related to derivatives contracts, and $912 million of credit expenses.
Credit losses will rise to $2.2 billion in 2008 and $2.9 billion in 2009.
The pretax loss of $4 billion was ten fold the reported $422 million loss in Q406.
Freddie Mac has lost about 60% of its stock market value in the past year...
The fair value of net assets was $12.6 billion, reflecting a net after-tax reduction of $19.2 billion from the December 31, 2006 level of $31.8 billion.
FHLMC was forced to issue $6 billion in preferred stock during Q4 to bolster reserves.
A big assumption... CFO Anthony Piszel:
"We believe we raised sufficient capital to get through 2008, assuming no further severe market downturns."
Moody's said today it is continuing to review Freddie Mac's financial strength rating of A-,
the second-highest grade, because of "significant deterioration of surplus regulatory capital."
The Nattering One repeats... there is no end in sight and the worst is yet to come, expect the GSE's (FNMA, FHLMC, FHA)
to be insolvent within the next three years, which will result in the largest bailout in history.
which account for 45% of the $11.5 trillion home loan market, are posting their biggest ever losses.
Freddie Mac, the 2nd largest mortgage finance company, posted a record $2.5 billion Q4 loss vs $2 billion in Q3; and a full year net loss of $3 billion.
Q4 loss of $2.5 billion was a 600% increase over the $401 million loss in the same quarter, a year ago.
This increase in loss resulted from significant mark-to-market losses in non interest income...
Other non interest income losses soared to $2 billion in Q4 from $601 million in Q3.
FHLMC reported writedowns and other non-interest expenses of $2.1 billion primarily related to derivatives contracts, and $912 million of credit expenses.
Credit losses will rise to $2.2 billion in 2008 and $2.9 billion in 2009.
The pretax loss of $4 billion was ten fold the reported $422 million loss in Q406.
Freddie Mac has lost about 60% of its stock market value in the past year...
The fair value of net assets was $12.6 billion, reflecting a net after-tax reduction of $19.2 billion from the December 31, 2006 level of $31.8 billion.
FHLMC was forced to issue $6 billion in preferred stock during Q4 to bolster reserves.
A big assumption... CFO Anthony Piszel:
"We believe we raised sufficient capital to get through 2008, assuming no further severe market downturns."
Moody's said today it is continuing to review Freddie Mac's financial strength rating of A-,
the second-highest grade, because of "significant deterioration of surplus regulatory capital."
The Nattering One repeats... there is no end in sight and the worst is yet to come, expect the GSE's (FNMA, FHLMC, FHA)
to be insolvent within the next three years, which will result in the largest bailout in history.
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