GAGE lending giant Freddie Mac is seeking $1.8bn (£1.1bn) in aid from the US Government after bad home loans prompted its fourth consecutive quarterly loss.
Freddie Mac, the second largest provider of funding for US residential mortgages, said it lost $6bn, or $1.85 per share, in the April-to-June period. The company is required to pay a 10 per cent annual dividend to the Treasury Department on money it has received from the government. That made up $1.3bn of the company’s second-quarter losses.The company lost $840m, or 26 cents a share, in the same quarter last year.
It is taking steps to speed the pace of faulty loan repurchases by lenders in an effort to more quickly cut losses it bills to taxpayers.
The government-controlled company said $5.6bn in repurchase requests had piled up as of 30 June, with some 24 per cent of the obligations outstanding more than 120 days. Three of the larger lenders have had 24 per cent of their repurchase demands outstanding for more than 120 days.
In the last six months, Freddie Mac has clawed back about $2.7 bn from the seller/servicers, which generally are lenders that sold loans into its mortgage-backed securities. Loan repurchases have come into focus as Freddie Mac and other financial institutions seek to push losses onto lenders that made mortgages that fell short of stated terms as they were packaged into US-supported mortgage bonds.
The push by Freddie Mac and rival Fannie Mae is key for reducing taxpayer-shouldered losses as both companies have come to rely on the government for their survival.n
In June, Freddie Mac was forced to delist from the New York Stock Exchange.