Mortgage giant Freddie Mac's first-quarter loss widened on higher credit-related expenses and another $7.1 billion in loan writedowns, though the red ink narrowed sharply from the $23.9 billion loss posted in the fourth quarter.
"This was another difficult quarter for Freddie Mac, as declining home prices and the weak economy continued to take a toll on our results," said interim Chief Executive John Koskinen. "While we expect the coming quarters to be difficult, we are seeing preliminary signs of slowing in home price declines as low mortgage rates and high affordability take hold."
Freddie and rival Fannie Mae, which were put under government conservatorship in September to prevent their potential bankruptcy, have been buoyed by massive government investments but have still been posting huge losses because of credit provisions.
Freddie posted a loss of $9.85 billion, or $3.14 a share, compared with a year-earlier loss of $151 million, or 66 cents a share.
The latest results included $7.1 billion in writedowns on securities held for sale, similar to the fourth quarter's $7.5 billion, and $9.1 billion in credit-related expenses, which were partially offset by net mark-to-market gains of $3.8 billion on the company's derivatives portfolio. In the year-earlier period, credit-related expenses were $1.45 billion.
The company also took a $3.1 billion writedown in the latest quarter on its deferred tax assets. They can be used to offset future profits, but expire after a certain period.
Revenue dropped 45% to $771 million.
Credit-loss provisions jumped to $8.8 billion from $7 billion in the fourth quarter amid continued credit deterioration in the company's single-family mortgage portfolio.
Freddie's red ink comes on top of a $23.2 billion loss posted by Fannie Mae last week. Fannie had $20.3 billion in credit-loss provisions and requested another $19 billion in government funds last week, which if approved through a preferred-stock purchase would put the total given by the government at $34.2 billion.
Freddie and Fannie's regulator, the Federal Housing Finance Agency, said in March it was looking at ways the two companies could help finance small mortgage banks and revive the market for loans made to such banks. The possible role is the latest sign of how they are being used increasingly as instruments of government policy rather than companies focused on shareholder returns.
Freddie's shares rose a penny in after-hours trading to 86 cents. The stock traded as high as $27.95 last May.
