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Freddie Mac raising capital


Another quarter of losses for Freddie Mac, but earnings beat estimates and provide hope.


The nations second largest agency that securitizes mortgage backed securities reported a net loss of one hundred and fifty one billion dollars in the first quarter of 2008. The loss was expected to be larger by most wall street analysts. Freddie Mac also announced a plan to raise over five billion dollars in new capital to better position the firms capital ratios. The firm has already received permission to go below their 20% threshold, which has allowed them to increase their loan portfolios. Their are some members of Congress who are growing concerned with the size of Fannie Mae and Freddie Mac and their potential exposure for tax payers if the real estate market collapses significantly.

Their is a hope that the housing market is beginning to bottom out and there is some optimism that heading into 2009 we will begin to see a rebound in the real estate arena. Freddie Mac has just begun to purchase jumbo home loans from a select group of lenders which should help boost the market for larger homes. The credit crunch that has hit the market in January appears to be passing and the major obstacle facing the firm moving forward will be foreclosures and the negative impact this is having with housing prices and inventory. Once the inventory levels begin to decline, home values should begin rising again. Freddie Mac was conservative with their outlook for the balance of 2008 which is in line with most economists believing the market still has not fully bottomed out.

5-15-08 ? LoanNetwork.com





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