Freddie Mac seeks $6.1B in US aid after 1Q loss

Freddie Mac reported Tuesday that it lost $10 billion in the first three months of the year as the federally run housing finance giant’s mortgage portfolio continued to decline in value.

The disclosure automatically prompts a $6-billion investment from the Treasury Department to keep the company solvent, bringing Freddie Mac’s bailout total to $51 billion in the first nine months of its government rescue.

The McLean, Va., company attributed the losses to further contraction of the economy but also said there were some indications of recovery ahead.

“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 John Koskinen, Freddie Mac’s interim chief executive. “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.”

Last week, Fannie Mae reported that it lost $23.2 billion in the first three months of the year as mortgage defaults increasingly spread from risky loans to the far-larger portfolio of loans to borrowers who had been considered safe. The loss brought Washington-based Fannie Mae’s total bailout to $34 billion.

Freddie Mac’s $10-billion loss compares with a $149-million loss in the same quarter last year. It was far smaller than the fourth-quarter loss, which was $24 billion.

The federal government seized Fannie Mae and Freddie Mac last September out of concern that they would collapse and threaten the entire financial system.

The government has pledged as much as $200 billion to offset losses at each mortgage giant.

The increase in the size of the company’s rescue -- in the form of Freddie Mac preferred stock acquired by the government -- will require the company to pay the Treasury a dividend of more than $5 billion a year. That is far more than Freddie Mac has earned in any year -- even when it was profitable.

As a result, Freddie Mac may have to borrow government money to pay the dividends due to the government. The same is true for Fannie Mae.