WASHINGTON – Freddie Mac on Thursday said the mortgage crisis continues to bathe it in red ink with third quarter losses growing to $6 billion, from $4.1 billion for the same period last year.
As a result, Freddie, run under federal conservatorship since September 2008, asked for another $6 billion in federal aid.
Taxpayers have spent about $169 billion to rescue Fannie and Freddie, the most expensive bailout of the 2008 financial crisis. The government estimates it will cost at least $51 billion more to support the companies through 2014, and as much as $142 billion in the most extreme case.
The taxpayer bailout has caused a growing move by Congress to shed the huge liability of the two secondary mortgage market giants and seek privatization of the secondary market. Freddie and Fannie own or guarantee about half of all U.S. mortgages, or nearly 31 million home loans worth more than $5 trillion. Along with other federal agencies, they backed nearly 90% of new mortgages over the past year.
Credit unions, which sell about half of their mortgages on the secondary market, are opposed to privatization and insist the government continue to subsidize the market, either by continuing its roll of buying loans from credit unions and banks, or guaranteeing mortgage backed securities, the lynchpin of the secondary market.
In a perverse arrangement with the federal government under the conservatorship, Freddie and Fannie will pay dividends on preferred shares held by the government, which is paid for by the taxpayer assistance from the federal government. For the third quarter Freddie Mac paid the government $1.6 billion in dividends.
Freddie Mac, which funded one in four single-family homes in the first nine months of the year, warned of more trouble ahead for the depressed U.S. housing market, which began to crater in 2007 during the subprime mortgage crisis.
“The weak labor market and fragile economy continue to weigh heavily on the single-family market, causing many potential buyers to sit on the sidelines or opt to rent despite high affordability and record low mortgage rates,” Haldeman, Jr. said. “We expect the tepid recovery to continue to put downward pressure on house prices into early next year.”
Through the first three quarters Freddie Mac reported a $10.7 billion loss, down from an $18.1 billion loss for the first nine months last year.
