Freddie Mac reported a $4.4 billion loss in the third quarter on Thursday and requested $6 billion in additional aid from the U.S. Treasury Department.
The loss, which translated to $1.86 per share, was Freddie's worst quarterly result in over year, up from a $2.5 billion loss in the third quarter of 2010.
The mortgage finance giant cited decreased interest on mortgage rates and insurers not paying out as much for defaults, which led to the losses.
The weak labor market and fragile economy continue to weigh heavily on the single-family market, causing many potential buyers to sit on the sidelines or opt to rent despite high affordability and record low mortgage rates, said Charles Haldeman, Freddie Mac's CEO, in a statement. Looking ahead, we expect the tepid recovery to continue to put downward pressure on house prices into early next year.
But he added that hundreds of thousands of borrowers were able to refinance at a lower rate, saving an average of $2,500 in interest payments, and defended Freddie's role in the housing market.
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Freddie Mac was a stabilizing force in the mortgage market, ensuring the continuous flow of funds to lenders and borrowers and helping families avoid foreclosure, Haldeman said in a statement.
The agency also said on Thursday that the rate on a 30-year fixed martgage fell to 4 percent, almost matching the all-time low of 3.94 percent in October. Still, underwriting standards have tightened and many Americans have chosen to rent instead of buy, fearing further drops in home values.
Freddie Mac is seeking the $6 billion to cover its net worth deficit, which stemmed from the quarterly losses and a $1.6 billion dividend payout. As part of its agreement with the Treasury, Freddie has to pay a 10 percent dividend every quarter.
It has received $72.2 billion in government aid after it was taken over in September 2008, along with Fannie Mae. In total, the two firms have drawn around $175 billion from the government and returned $30 billion through dividends, costing taxpayers around $145 billion. Last week, the organization announced that Haldeman plans to resign by the end of the year.
Freddie's regulator, the Federal Housing Finance Agency, has sued 17 large banks over mortgage-backed securities, which may help it recoup some losses.
Shares of Freddie Mac were trading around 25 cents mid-Thursday.