Freddie Asks for $10.6 Billion

By Nick Timiraos

Freddie Mac says it will need an injection of $10.6 billion from the U.S. Treasury after posting a $6.7 billion loss for the first quarter, as the weak housing market continued to burn a hole in the company’s balance sheet. Freddie, which had a loss of $9.8 billion a year earlier, said that the brunt of its losses resulted from accounting changes that took effect Jan. 1 and brought some $1.5 trillion in mortgage guarantees onto its balance sheet.  The government has said it would put unlimited amounts of capital into the companies to keep them afloat over the next three years. Freddie’s request for more aid, its first in three quarters, will bring the government’s tab for both companies to $136.5 billion. Freddie has lost $82 billion over 10 of the past 11 quarters, or nearly twice the amount it earned in the previous 30 years. But there are some early signs that a more stable economy could stanch losses. The number of loans that were 90 days or more delinquent at the end of March fell to 4.13% from 4.20% in February, the first monthly decline in over three years.  Analysts have warned that the longer the companies are used to provide mortgage credit, the harder it will become to wean the country from those subsidies and to revamp the firms. The current financial-regulatory bill “is already fiendishly complicated,” says Karen Shaw Petrou, an analyst at Federal Financial Analytics. “There’s no denying that Fannie and Freddie need ultimate resolution … but because markets are so fragile, one needs to be really, really careful.”

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