WASHINGTON -- Government-controlled mortgage
giant Freddie Mac has requested $6 billion in additional aid after posting a wider loss in the third quarter.
Freddie Mac said Thursday that it lost $6 billion, or $1.86 per share, in the July-September quarter. That compares with a loss of $4.1 billion, or $1.25 a share, in the same quarter of 2010.
The government rescued McLean, Va.-based Freddie Mac and sibling company Fannie Mae in September 2008 after massive losses on risky mortgages
threatened to topple them. Since then, a federal regulator has controlled their financial decisions.
Taxpayers have spent about $169 billion to rescue Fannie and Freddie, the most expensive bailout of the 2008 financial crisis. The government estimates that it will cost at least $51 billion more to support the companies through 2014, and as much as $142 billion in the most extreme case.
Freddie and Washington-based Fannie own or guarantee about half of all U.S. mortgages, or nearly 31 million home loans worth more than $5 trillion. Along with other federal agencies, they backed nearly 90 percent of new mortgages over the past year.
The two mortgage giants buy home
loans from banks and other lenders, package them into bonds with a guarantee against default, and then sell them to investors around the world. When property values
drop, homeowners default - either because they are unable to afford the payments or because they owe more than the property is worth. Because of the guarantees, Fannie and Freddie must pay for the losses.
and delays in foreclosure processing
because of a yearlong government investigation into mortgage lending practices have reduced the companies' projected losses.
Fannie and Freddie are required to pay 10 percent dividends on the government money they receive. Freddie paid $1.6 billion in dividends to the Treasury Department in the July-September quarter.
Pressure continues on the government to eliminate Fannie and Freddie and reduce taxpayers' exposure to risk. The Treasury Department put forward a plan in February to slowly dissolve Fannie and Freddie, although that process could take years. Abolishing Fannie and Freddie would transform how homes are bought and redefine who can afford them.
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