WASHINGTON - Freddie Mac's losses narrowed to US$6.3 billion in the third quarter, but the government-controlled mortgage finance company didn't need a federal cash infusion.
The McLean, Virginia-based company has received about $51 billion since it was seized by federal regulators in September 2008, but said it didn't need any more money for the second-straight quarter.
"We continued to see some positive housing market developments, including higher volumes of home sales and modest increases in house prices in certain areas of the country," the company's new chief executive, Charles Haldeman, said in a statement Friday.
However, he cautioned, high unemployment and rising foreclosures will continue to "impede a full recovery," and the company may need more money from the Treasury Department to stay afloat. The government reported Friday that the unemployment rate hit 10.2 per cent, the highest since early 1983.
Freddie Mac's quarterly loss works out to $1.94 per share and includes $1.3 billion in dividends paid to the Treasury Department. It compares with a loss of $25.3 billion, or $19.44 per share, in the year-ago period.
The results were driven by $7.6 billion in credit losses as the company continued to build its reserves for bad mortgages. About 3.3 per cent of Freddie Mac's borrowers are at least three payments behind on their mortgages, more than double the rate last year.
The problems at Freddie Mac and its sibling Fannie Mae have proven far worse than most experts had foreseen. On Thursday, Fannie Mae asked the government for another $15 billion, bringing the tab for rescuing both companies to about $111 billion.
Fannie Mae and Freddie Mac play a vital role in the mortgage market by purchasing loans from banks and selling them to investors. Together, Fannie and Freddie own or guarantee almost 31 million home loans worth about $5.5 trillion. That's about half of all mortgages.
The two companies lowered their standards for borrowers during the real estate boom and are reeling from the consequences. High-risk loans, now defaulting at a record pace, have come back to haunt the companies. Worse still, the recession is causing formerly reliable homeowners with good credit to default.
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