Freddie Mac has reported a $6.7 billion net loss for the first quarter, prompting the company's conservator, the Federal Housing Finance Agency, to request a $10.6 billion draw from the U.S. Treasury Department.
After dividend payments of $1.3 billion on its senior preferred stock to the Treasury, Freddie Mac reports a net loss attributable to common stockholders of $8 billion for the first quarter of 2010, compared to a net loss attributable to common stockholders of $7.8 billion the fourth quarter of 2009.
On Jan.1, Freddie Mac adopted new accounting standards related to transfers of financial assets and consolidation of variable interest entities (VIEs). As these changes in accounting principles were applied prospectively, the results of operations for the first quarter are not directly comparable with the results of operations for prior periods, which reflect the accounting standards in effect during those periods, Freddie Mac says.
The company had a net worth deficit of $10.5 billion at March 31, compared to positive net worth of $4.4 billion at Dec. 31, 2009. This net worth deficit was primarily driven by a significant net decrease in total equity of $11.7 billion due to the adverse impact of the consolidation of VIEs.
The decline in net worth also resulted from the first-quarter 2010 net loss of $6.7 billion and the dividend payment of $1.3 billion to Treasury on the senior preferred stock.
"Throughout the first quarter of 2010, Freddie Mac continued to focus on strengthening underwriting and improving credit quality," says Freddie Mac CEO Charles E. Haldeman Jr. "At the same time, we helped more than 440,000 families own or rent a home, and more than 71,000 avoid foreclosure."
Haldeman additionally notes signs of stabilization in the housing market, including house prices and sales in certain geographic areas. But, he adds, "housing in America remains fragile with historically high delinquency and foreclosure levels, and high unemployment among the key risks."
SOURCE: Freddie Mac