Freddie Mac Tells Fed 'We’re Broke'

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Freddie Mac (Stock Quote: FRE) CEO Charles Haldeman is calling it like he sees it.

He says that a full-blown U.S. housing recovery is years away. He also says that to cover potential losses, the mortgage giant needs billions of dollars from Uncle Sam. With a bevy of new sheriffs in town in D.C., that money won’t come easy – no matter how badly Freddie needs the cash.

Freddie Mac reported a $2.5 billion loss for the third quarter of 2010, and now it’s heading back to Capitol Hill to ask for more money from Congress – approximately $100 million for the short term, and tens of billions more during the next 10 years.

But at least Freddie Mac, while also reporting losses, is losing money at a slower pace. That $2.5 billion loss wasn’t as bad as the $4.7 billion the mortgage giant shed in the quarter ending June 30, 2010.

For its part, Freddie Mac officials say it’s doing a bang-up job.

According to Freddie, the company reported total comprehensive income of $1.4 billion for the quarter ending Sept. 30, compared to a total comprehensive loss of $0.4 billion for the quarter ending June 30. It also reported a net worth deficit of $58 million at Sept. 30, compared to a net worth deficit of $1.7 billion at June 30.

"The actions we have taken together with our mortgage lenders to continue to build a strong foundation of responsible lending practices are working – the 2009 and 2010 books of business are the strongest since 2003 as measured by LTV and FICO scores," said Haldeman in a statement. "These changes are good for borrowers, Freddie Mac and the entire housing market, producing loans that help to create sustainable homeownership opportunities for America's families.”

But Haldeman isn’t so bullish on the U.S. housing market, saying there are few solid signs of recovery. “As we near the end of 2010, the housing market remains fragile, and has recently come under renewed pressure from slowing economic growth, weaker employment and foreclosure uncertainties," Haldeman said. "We believe that it will be a considerable time until the housing market has a sustained recovery."

If that’s the case, then Freddie might be in real trouble. With about one in 10 homes behind on their mortgage payments, the agency (along with sister Fannie Mae: Stock Quote: FNM) may need more than the $389 billion the Congressional Budget Office estimated it would need in an Aug. 2009 white paper entitled CBO’s Budgetary Treatment of Fannie Mae and Freddie Mac.

Will the two agencies get the dough? Some critics say that it’s high time for Fannie and Freddie to shut down – and a lot of them just got elected to Congress last week. But that’s easier said than done considering that Fannie Mae and Freddie Mac manage approximately $5 trillion and account for almost half of all outstanding residential mortgages, according to the CBO report.

With that much at stake, the odds are that the government will try to keep Fannie and Freddie afloat – at least long enough to weather the current housing crisis.

But after that, all bets are off.

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