Freddie Mac Posts Wider $2.5B Loss in 4Q

WASHINGTON (AP) -- Freddie Mac on Thursday said its loss widened to $2.5 billion in the fourth quarter of 2007 as defaults mounted on home mortgages and it set aside cash in expectation of further losses.

The fourth-quarter loss at Freddie Mac, the No. 2 U.S. buyer and backer of home loans, was larger than Wall Street expected and compares with a loss of $401 million in the last three months of 2006.

Freddie Mac reported the latest loss was equivalent to $3.97 a share versus a loss of 73 cents a share a year earlier and steeper than the loss of $2.34 per share that Wall Street analysts polled by Thomson Financial had expected.

Analysts on average had expected Freddie to report a $1.5 billion loss for the quarter.

The report followed by a day an earnings release by Fannie Mae, the larger government-sponsored sibling of Freddie Mac, showing a loss of nearly $3.6 billion in the October-December quarter. A federal regulator announced Wednesday that Fannie and Freddie will be allowed to expand their roles in the turbulent mortgage market, through the removal on March 1 of an investment-portfolio cap placed in the aftermath of multilbillion-dollar accounting scandals at the companies.

Analysts said the impact will be limited, however, because of the large cash cushion the companies must maintain as a reserve against risk.

McLean, Va.-based Freddie Mac's loss for all of 2007 was $3.1 billion, or $5.37 a share, compared with a profit of $2.3 billion, or $3 a share, in 2006.