Freddie Mac posts $2.5 billion loss in Q4

NEW YORK (Reuters) — Freddie Mac (FRE), the second-biggest provider of U.S. residential mortgage money, on Thursday said its loss widened more than expected to $2.5 billion in the fourth quarter as the housing crisis worsened. The company said its net loss increased from $401 million in the year-earlier period. It is coming off a $2 billion loss for the third quarter. The company lost $3.97 a share in the fourth quarter. Analysts expected the company would post a fourth-quarter loss of $3.05 per share including special items, according to Reuters Estimates. A sharper-than-expected drop in home prices that first sparked a crisis in subprime lending has since tainted the entire U.S. housing market, hurting Freddie Mac and its sibling Fannie Mae. Rising delinquencies and foreclosures have led the companies to write down values of mortgage securities they own and increase reserves to cover their guarantees of payment on bonds held by investors. Freddie Mac, citing the "severe" housing downturn, revised its estimate of total credit losses for 2008 and 2009 to $2.2 billion and $2.9 billion, respectively. Credit-related expenses were $912 million for the quarter, while total credit losses were $236 million. Freddie Mac, which was chartered by Congress in 1970 to buy mortgages from primary lenders and provide a steady stream of cash for home loans, is now struggling to strike a balance between growing its business while tightening underwriting guidelines to protect itself from further losses. The federal regulator for Freddie Mac and Fannie Mae on Wednesday lifted restrictions on the growth in the companies' combined $1.4 trillion mortgage portfolios, giving them more flexibility to support housing. But dire predictions for delinquencies and foreclosures this year will probably keep the companies conservative with their capital, analysts said.