Publish date:

Freddie CEO: Subprime Losses Mounting

The government-sponsored mortgage giant said it could shed as much as $7.5 billion.

Freddie Mac's

CEO said the government-sponsored mortgage buyer will lose as much as $7.5 billion in the next few years, amid a prolonged housing slump and rising foreclosures.

Richard Syron, chairman and CEO of the second-biggest purchaser of mortgages behind sister company

TST Recommends

Fannie Mae

, said the company could lose between $5.5 billion and $7.5 billion in the next few years, according to published reports.

"I honestly think it's going to get tougher before it gets better," he said at an investor conference sponsored by Goldman Sachs, according to the

Associated Press


While the mortgage crisis has brought a rising wave of foreclosure notices into public view, less evident have been "pictures of people standing with furniture on the lawn," after being forcibly evicted from their homes, Syron said, according to the


. "As that begins to happen, and it will happen, I am afraid of the impact that this has."

Freddie posted a $2 billion net loss for the third quarter as a result of the increased cash the company needed to set aside for rising credit losses, as well as a markdown in the value of its assets. Fannie Mae also posted losses for the third quarter.

Syron's comments came just hours before the Federal Reserve cut the federal funds rate a quarter-point to 4.25% on Tuesday afternoon; the Fed announcement sent stocks tumbling.

Shares of Fannie Mae and Freddie Mac plummeted 7.1% and 10.6%, respectively.

Last week, Freddie Mac slashed its dividend by 30% and said it would raise $7 billion in preferred stock offerings in an effort to shore up its balance sheet amid subprime-mortgage-related losses.

The news is troublesome because Fannie and Freddie are some of the largest purchasers of residential mortgage loans. The need for the government-sponsored entities to purchase mortgage loans is especially important these days, as the market for mortgage-backed securities remains for the most part frozen.

Freddie Mac is also tweaking its guidelines for purchasing delinquent mortgages in an effort to shore up its balance sheet.