This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Freddie May Need New Capital

Updated from 10:40 a.m. EST

Shares of mortgage giants Freddie Mac (FRE) and Fannie Mae (FNM) are getting spanked in trading, after the former posted a $2 billion third-quarter loss Tuesday morning.

Freddie shares were plummeting almost 29% after announcing before the opening bell that it may need to cut its dividend by 50% and seek out additional sources of capital. The so-called government-sponsored entities, which purchase residential mortgages and mortgage related securities, hired Goldman Sachs (GS) and Lehman Brothers (LEH) to help it hit the Street for fresh funds.

"We do not believe it would be wise to be sanguine about the intermediate-term housing market," said CEO Richard Syron during Freddie's third-quarter earnings call. He added, however, that he still remains positive about the long-term opportunities for shareholders.

The comments did little to quell investor fears, which sent Freddie shares down $10.85 to $26.65. Its bigger peer, government-sponsored entity Fannie Mae, which found itself having to defend its accounting practices after a media report suggested it had changed the way it accounted for losses last week, also was down almost 24% to $29.75.

McLean, Va.-based Freddie said it would need to set aside $1.2 billion in the third quarter to account for bad home loans, prompting the nation's second-largest guarantor of home mortgages to seek additional sources of capital.

The quarterly loss equated to $3.29 a share. In the same period a year earlier, Freddie Mac lost $715 million, or $1.17 a share.

1 of 4

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
SYM TRADE IT LAST %CHG
AAPL $125.01 -0.63%
FB $78.10 0.70%
GOOG $524.22 -1.24%
TSLA $230.43 -1.08%
YHOO $41.66 0.87%

Markets

DOW 17,841.98 -86.22 -0.48%
S&P 500 2,080.15 -9.31 -0.45%
NASDAQ 4,919.6440 -19.6830 -0.40%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs