InvestIdeas

14 May 2008 11:33 GMT
07:32 EDT 05/14 *FREDDIE MAC:COMPANY TO RAISE $5.5 BLN IN NEW CORE CAPITAL

*FREDDIE MAC:OFHEO SAID REDUCE CAP SURPLUS TO 15% FROM 20%

14 May 2008 17:24 GMT
Freddie Mac loses $151M in 1Q, but beats expectations
(AP) - Mortgage finance company Freddie Mac said Wednesday its first quarter loss widened to $151 million as the U.S. housing market worsened, though the results were not as poor as expected. Its shares jumped on the news.

McLean, Va.-based Freddie Mac, the nation's second-largest buyer and backer of home loans, plans to raise $5.5 billion in new capital, following a similar move last week by Fannie Mae, its larger government sponsored sibling.

It was the third-straight quarterly loss for Freddie Mac, which lost $4.5 billion in the second half of 2007.

Moody's Investors Service downgraded the company's financial strength rating, projecting Freddie Mac will be hit with up to $7.5 billion in total losses from soured mortgages over the next two years.

While critics say Freddie and Fannie pose a tremendous risk to the financial system should they collapse and require a government bailout, Freddie CEO Richard Syron said in a conference call with analysts that losses from the mortgage mess will be manageable "under any reasonable scenario."

Company executives maintained their projection that average U.S. home prices will drop by 15 percent from their peak, but didn't rule out greater declines. "It's clear we have not yet hit bottom in the housing market," Syron said.

Nevertheless, investors were encouraged that relaxed requirements by the company's federal regulator will allow Freddie to play a larger role in the battered mortgage market. Also, Freddie, unlike Fannie, did not cut its dividend.

The company's plan to raise capital -- evenly split between common and preferred stock -- is likely more conservative than many investors had expected, thus resulting in less dilution for existing shareholders, said analyst Jim Vogel of FTN Financial in Memphis, Tenn.

"There were a lot of bears on Freddie who felt they would have to raise still more," common stock, Vogel said.

Freddie Mac's shares gained $2.23 or 8.9 percent, to $27.19 in midday trading.

As a result of the planned stock sale, Freddie's federal regulator said it would reduce the capital cushion the company must maintain.

The Office of Federal Housing Enterprise Oversight made a similar announcement last week for Fannie, which is raising $6.5 billion to fortify its balance sheet after posting a $2.2 billion first quarter loss.

Freddie Mac's chief financial officer, Buddy Piszel, said the regulator's move would allow Freddie to buy mortgage securities at attractive prices. "There's a lot of supply...and not as much demand," he said in an interview.

Freddie will be required to keep 15 percent more capital than required by law, down from the current 20 percent mandate. Another five-point cut is expected to come in September, as long as the company stays in good standing with the regulator.

The quarterly loss at Freddie was larger than a loss of $133 million in the January-March period last year. The results were equivalent to a loss of 66 cents a share, compared with 35 cents a share a year earlier.

Analysts surveyed by Thomson Financial had expected the government-sponsored company to lose 92 cents a share on average in the latest period.

Freddie Mac said it changed how it accounts for the value of derivatives, the complex financial instruments used to hedge against swings in interest rates. The company's financial picture improved as a result.

The company lost more than $1.3 billion on derivatives in the first quarter, compared with nearly $2.3 billion in the fourth quarter of 2007.

Freddie said it set aside $1.2 billion for losses in the first quarter as a result of rising mortgage delinquency rates, falling home prices and sales. Revenue in the period, however, rose to $1.53 billion from $694 million a year earlier.

Piszel, however, cautioned that the company's losses from the mortgage mess are likely to last through 2009.

Freddie is expecting total losses from bad mortgages and foreclosed properties to hit $3.1 billion this year, or 0.16 percent of the total value of mortgages the company guarantees. That's up from an earlier projection of 0.12 percent.

"We would have to acknowledge that credit is worse," Piszel said.

New data on foreclosures underscored that point. Foreclosure listing service RealtyTrac Inc. said Wednesday that more than 243,000 U.S. homes received at least one foreclosure-related filing in April, up 65 percent from the same month last year.

In response to growing economic distress, lawmakers are trying to come to terms with the White House on a broad package of housing legislation that would help an estimated 500,000 homeowners refinance into new loans, while tightening oversight over Fannie and Freddie.

Democrats are trying to attract enough Republican support to move the bill through the Senate, but it remained unclear whether they could draw enough support to do so.

19 May 2008 17:26 GMT
Freddie issuing $8 billion in new securities
WASHINGTON (AP) - Freddie Mac, the second-largest U.S. buyer and guarantor of home loans, said Monday it plans to issue $8 billion in new mortgage-backed securities this week.

The government-sponsored company will issue $4 billion in new two-year reference notes and an additional $4 billion in new five-year reference notes, which are the mainstays of the mortgage securities it routinely issues.

McLean, Va.-based Freddie Mac said it will set prices for the two issues this week, by Wednesday at the latest.

The company also announced that it increased by $1 billion the size of its 3.25 percent three-year reference notes maturing on Feb. 25, 2011, bringing the total amount of the issue to $4 billion.

Including the offerings announced Monday, Freddie Mac has issued $26 billion in reference notes this year.

Freddie Mac and Fannie Mae, its larger government-sponsored sibling, together issue more than three-quarters of all securities backed by home mortgages. Amid the distress in the housing market, the government has increasingly looked to the two companies to step up their roles and help restore stability to the market by gbuying up more mortgages and bundling and selling them as securities.

Freddie Mac last week reported a first-quarter loss of $151 million, or 66 cents a share, beating the expectations of Wall Street analysts with help from a change in its accounting methods -- but failing to dispel concerns about its ability to weather the U.S. housing slump. The company announced plans to raise $5.5 billion in new capital by selling special stock.

20 May 2008 20:26 GMT

Fannie CEO sees steep home-price drop
WASHINGTON (AP) - Fannie Mae's CEO told shareholders Tuesday that the housing market is "about halfway through" its crisis and home prices could fall as much as 25 percent before the worst is over.

The largest U.S. buyer and guarantor of home mortgages will be able to weather the downturn and expand its business, Fannie Mae's president and CEO, Daniel Mudd, said as he and other top executives faced shareholders at an annual meeting in New Orleans.

As Mudd spoke in New Orleans, a key Senate panel approved a $300 billion homeowner rescue plan to provide cheaper, government-backed mortgages to as many as 500,000 struggling borrowers. The legislation also includes tougher federal oversight of Fannie Mae and its smaller government-sponsored sibling, Freddie Mac.

Under a key concession to Republicans for backing the plan, the rescue would be financed with a share of the two companies' profits.

Fannie shares declined $1.20, or about 4 percent, to $27.75 in early afternoon trading Tuesday. Freddie's stock slipped 50 cents, or around 2 percent, to $26.51.

After posting a first-quarter loss of $2.2 billion amid rising mortgage defaults, Fannie Mae earlier this month cut its dividend and raised $7 billion in new capital by issuing new shares to shore up its finances. Federal regulators loosened the capital requirements of Fannie and Freddie, to enable them to play a bigger role to bolster the housing market.

Mudd said Tuesday the company expects U.S. home prices to fall as much as 25 percent from their highs of mid-2005. Losses for Washington-based Fannie Mae from defaulted mortgages are expected to worsen next year.

The housing market is in its most severe slump since the Depression, Mudd said, a crisis "which we're likely to be about halfway through right now."

Another two firms going under???
无风不起浪

Freddie and Fannie in turmoil
By James Politi in Washington and Ben White in New York

Published: July 10 2008 16:05 | Last updated: July 10 2008 21:03

Shares in Freddie Mac and Fannie Mae plunged in frantic trading on Thursday in spite of attempts by US regulators to provide reassurance that the two government-sponsored mortgage financiers remained on a solid footing.

Shares in Freddie were down 17.7 per cent and Fannie’s were off 10 per cent by mid-afternoon in New York, their lowest levels since 1991. Other participants in the mortgage market, including Lehman Brothers, also suffered steep falls, although the overall stock market climbed higher.

http://www.bloomberg.com/apps/news?pid= ... refer=home

U.S. Considers Taking Over Fannie Mae, Freddie Mac, NYT Reports

By Joseph Galante

July 10 (Bloomberg) -- U.S. officials are considering plans to take over one or both of the nation's largest mortgage finance companies, Fannie Mae and Freddie Mac, if they continue to deteriorate, the New York Times reported.

The government is discussing placing them in a conservatorship, under which the companies' shares would be worth little or nothing and losses on mortgage holdings would be covered by taxpayers, the Times said, citing unidentified officials briefed on the matter. Their shares are plunging and their borrowing costs are rising as investors worry the companies will suffer losses larger than the $11 billion they have lost in recent months, the Times said.

The Bush administration is also considering offering an explicit government guarantee on the $5 trillion debt owned or guaranteed by the companies, the Times said. Such an option is less likely because it would double the public debt, the newspaper said.

Still, Fannie and Freddie aren't considered to be in a crisis, and no action is imminent, the officials told the Times.

To contact the reporter on this story: Joseph Galante in San Francisco at [email protected]
Last Updated: July 10, 2008 23:47 EDT

I am just thinking here.

What is the consequences of not saving these companies?

Lots of companies would lose money. More provision of write-offs.

Is this better? Or is saving it and passing the burden to taxpayer better?

Most rich people would have means to avoid tax. So, ultimately the taxpayer that suffer is the middle class.

At the same time, I would be the first to acknowledge that I know nothing about Fannie and Freddie.

The only Freddie (Mercury) I know is dead.

iam802 wrote:I am just thinking here.

What is the consequences of not saving these companies?

Lots of companies would lose money. More provision of write-offs.

Is this better? Or is saving it and passing the burden to taxpayer better?

Most rich people would have means to avoid tax. So, ultimately the taxpayer that suffer is the middle class.

At the same time, I would be the first to acknowledge that I know nothing about Fannie and Freddie.

The only Freddie (Mercury) I know is dead.

More info here: http://en.wikipedia.org/wiki/Freddie_Mac

Fannie Mae: http://en.wikipedia.org/wiki/Fannie_Mae

iam802 wrote:What is the consequences of not saving these companies?

The Fannie and Freddie doomsday scenario

That's why Dow Jones newswire attributed the pre-lunch regional mkts' recovery to the NYT article posted by GR above.