Truemors
is reporting from
Member
NP Rank:
NP Rank:
Freddie Mac Suffers $861 Million Loss
Share:
by jordan | August 6, 2008 at 09:21 am
220 views | 16 Recommendations | 4 comments
Photos
The Federal Home Loan Mortgage Corporation (Freddie Mac to you and me) is facing losses far worse than analystis predicted. The FHLM exists to create a secondary market for mortgages, and its business model seems not to have predicted such a dire state of affairs: buying up countless ballooned mortgages even as the housing market slows to a crawl. Though some of Freddie Mac's stock was purchased by the US government in order to give it a boost, Freddie mac's securities (the financial tools it sells based on the mortgages it owns) are not guaranteed by the federal government.
Reeling from the loss, McLean, Va.-based Freddie Mac is planning to slash its dividend to five cents a share or less for the third quarter, down from a previous payout of 25 cents a share.
Freddie Mac's shares dropped 12%, or 97 cents, in late morning trades, to $7.07, while shares of fellow mortgage-buyer Fannie Mae fell 9%, or $1.21, to $12.39. Freddie Mac's quarterly loss was the equivalent of $1.63 a share, compared to a profit of $729 million, or 96 cents a share, generated in the year-ago period.
Several years ago, when I was training to get my NY real estate sales license (those are really easy to get, by the way), one of the instructors predicted this very situation. A cramped, sweaty classroom in East Midtown, and this guy saw the crisis coming several years away, as did many.
Most RecentMost Recommended Comments (4)
at 10:16 on August 6th, 2008
What did your instructor say about why?
at 10:50 on August 6th, 2008
jordan, I like this story. It's good stuff.
I still don't understand why they don't work with the originators to refinance the loans. Better than writing them down.
at 14:18 on August 6th, 2008
Another bail-out brought to you by the children of the current taxpayers of the USA. Thank you corporate socialism!
at 17:54 on August 6th, 2008
jordan, I like this story. It's good stuff.
We should have let the bastards fail or at least break up this quasi-free market set up. Where else do you get monopolies other than when the government sets them up? Break Fannie and Freddie up into ten to twenty smaller companies and any idiotic shenanigans won't potentially cripple the market.
Seriously folks, Fannie and Freddie were chartered to be a broker of loans. But they got all caught up with the home craze and actually kept a big portion of those repackaged loans on their books.
Break them up - there will still be problems (there always are) but they will be more manageable if they're smaller problems.