Freddie Mac to ask Treasury Department for another $1.5 billion

By Angela McDaniels

Tacoma, Wash., Aug. 8 - Freddie Mac will request another $1.5 billion from the Department of the Treasury under its senior preferred stock purchase agreement, according to the agency's second-quarter earnings release.

The funds will be used to eliminate the agency's net worth deficit, which was $1.5 billion as of June 30.

The draw will increase the total amount of preferreds issued to the Treasury to $66.2 billion. The dividends payable on these preferreds will total $6.6 billion per year, which exceeds the agency's annual historical earnings in all but one period.

Freddie Mac said it is unlikely over the long term to regularly generate net income or comprehensive income in excess of the dividends payable to the Treasury.

Since entering into conservatorship in September 2008, the agency has made $13.2 billion of dividend payments to the Treasury.

The agency must pay a commitment fee under the preferred stock purchase agreement, which the Treasury can waive for up to one year. The Treasury agreed to waive this fee for the first three quarters of 2011 and will re-evaluate whether to waive it in the fourth quarter. Freddie Mac said the amount of the fee has not been established and could be "substantial."

The agency said its net worth deficit as of June 30 was due to several contributing factors, including the $1.6 billion quarterly dividend payment to the Treasury and the $1.1 billion total comprehensive loss for the second quarter.

Freddie Mac's net loss for the quarter was $2.1 billion.

During the first quarter, the agency had $676 million of net income and $2.74 billion of total comprehensive income.

As previously reported, Fannie Mae will request another $5.1 billion from the Treasury in order to eliminate its net worth deficit. The draw will increase the amount of preferreds issued to the Treasury by Fannie Mae to $104.8 billion.

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