Mortgage guarantor Freddie Mac (FRE), Wednesday said its loss for the fourth quarter widened from the year-ago period, hurt by hefty non-interest losses. To avoid being placed under receivership by Federal Housing Finance Agency or FHFA, Freddie Mac, under the Senior Preferred Stock Purchase Agreement, has made a request with the Treasury for funding to the tune of $30.8 billion.
The McLean, Virginia-based company reported a fourth-quarter net loss of $23.85 billion or $7.37 per share that widened from $2.45 billion or $3.97 per share in the corresponding quarter last year.
Freddie Mac said its fourth quarter 2008 results were driven primarily by net mark-to-market losses of $13.3 billion on the company's derivative portfolio, guarantee asset and trading securities due to the impacts of spread widening and declines in interest rates. In addition, the company recorded $7.2 billion in credit-related expenses and security impairments on the available-for-sale securities of $7.5 billion primarily due to sustained deterioration in the performance of the underlying collateral on its non-agency mortgage-related securities.
In the fourth quarter of 2008, Freddie Mac also recognized an additional valuation allowance of $8.3 billion against its net deferred tax assets.
Net interest income for the quarter increased to $2.63 billion from $774 million in the prior-year similar period.
Non-interest loss for the quarter widened to $18.44 billion from $1.51 billion in the fourth-quarter of fiscal 2007.
David Moffett, Freddie Mac's CEO said, "Freddie Mac is working hard to serve our expanded mission in this historic crisis, by doing all we can to help stabilize the financial markets and hasten the recovery in housing."
Non-interest expense for the fourth-quarter ended 31st December 2008 increased to 9.0 billion from $3.34 billion in the comparable period of fiscal 2007.
Income tax benefit for the quarter was $967 million compared to $1.63 billion in the corresponding period of fiscal 2007.
At December 31, 2008, the company had two secured, uncommitted lines of credit totaling $17 billion that remain unused.
During 2008, Freddie Mac purchased or guaranteed more than $460 billion in mortgage loans and mortgage-related securities, helping to finance more than 1.7 million single-family homes and 620,000 units of rental housing.
Provision for credit losses was $7.0 billion for the fourth quarter of 2008, compared to $5.7 billion for the third quarter of 2008.
At December 31, 2008, the company's liabilities exceeded assets under GAAP by $30.6 billion while stockholders' deficit totaled $30.7 billion. As such, Freddie Mac must obtain funding from Treasury pursuant to its commitment under the Purchase Agreement in order to avoid being placed into receivership by FHFA. On November 24, 2008, the company received $13.8 billion from Treasury under the Purchase Agreement.
The Director of FHFA has submitted a draw request to Treasury under the Purchase Agreement in the amount of $30.8 billion, which the company expects to receive in March 2009. As a result of these draws, the liquidation preference on the senior preferred stock will increase from $1.0 billion as of September 8, 2008 to $45.6 billion and the remaining funding available under Treasury's announced commitment will decrease to approximately $155.4 billion.
Freddie Mac paid first quarterly dividend of $172 million on the senior preferred stock on December 31, 2008 at the direction of the Conservator.
Earlier on February 18, 2009, Treasury Secretary Geithner increased the funding available from Treasury under the Purchase Agreement from $100 billion to $200 billion.
On November 17, 2008, the company received a notice from the NYSE indicating the failure to satisfy one of the continued listing standards which calls for average closing price of common stock to be above $1 per share. As of March 2, 2009, Freddie Mac's common stock continue to trade on the NYSE with average share price for the 30 consecutive days ended March 2, 2009 less than $1 per share.
On February 26, 2009, the NYSE submitted a rule change to the SEC for suspending the application of its minimum price listing standard until June 30, 2009. If the company does not regain compliance during the suspension period, the six-month compliance period that began on November 17, 2008 will recommence and Freddie Mac will have the remaining balance of that period to meet the standard. If the company fails to rectify the deficiency when the minimum price standard recommences, NYSE will initiate suspension and delisting procedures.
For fiscal 2008, Freddie Mac reported a net loss of $50.12 billion or $34.60 per share, compared to a loss of $3.09 billion or $5.37 per share in the corresponding period last year.
Net interest income for the fiscal 2008 increased to $6.80 billion from $3.10 billion in the prior-year similar period. Non-interest loss for the full year 2008 widened to $29.18 billion from $275 million in the fiscal 2007.
Freddie Mac closed Wednesday's regular trading at $0.42 on a volume of 5.51 million shares on the NYSE. In after hours, the stock is down by a penny trading at $0.41.
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