Freddie Mac also affirmed a commitment to raise $5.5 billion in additional capital, but announced no immediate details of the plan to raise the funds. The company, which is the second-largest provider of residential mortgage funding in the nation, said that it continues to maintain a surplus over all regulatory capital requirements.
Said Freddie Mac Chairman and Chief Executive Richard Syron, "While we expect continued housing and economic weakness will affect our overall performance this year, we continue to maintain a surplus over all regulatory capital requirements." Syron continued, "We remain committed to raising $5.5 billion of new capital and will evaluate raising capital beyond this amount depending on our needs and as market conditions mandate."
McLean, Virginia-based Freddie Mac and rival Fannie Mae, which together own or guarantee half of all U.S. mortgages, saw their stocks plunge in a spate of frenzied selling last month when investors speculated the mortgage companies lacked the capital necessary to offset losses resulting from delinquent mortgages. The companies own or guarantee more than $5 trillion in mortgages, or nearly half of all U.S. home loans.
In the wake of the ensuing turmoil, U.S. Treasury Secretary Henry Paulson teamed with U.S. Federal Reserve Chairman Ben Bernanke to establish emergency measures that assured government backing for the companies. Evidence of government support came in the form of a sweeping housing rescue bill passed by Congress and signed into law by President Bush last week.
To help preserve capital, Freddie Mac announced it would make an 80 percent cut to its quarterly dividend, to 5 cents a share from 25 cents a share, pending board approval.
Freddie Mac said revenue actually rose by more than 10 percent from the first quarter to $1.69 billion, including an increase of 92 percent in net interest income to $1.5 billion. However, total credit losses also rose -- to $810 million from $528 million in the first quarter.
Freddie Mac shares closed yesterday at $8.04, up 6.9 percent amid the biggest one-day gain in the S&P 500 in four months. The stock has more than doubled from last month’s low of $3.89, but remains almost 90 percent below its 52-week high of $66.65 set this time last year.