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To: koan who wrote (143284)	1/23/2009 7:04:17 PM
From: Rocket Red	Read Replies (1) \| Respond to of 314337

Freddie Needs Up to $35 Billion More From U.S. (Update2) Email \| Print \| A A A By Dawn Kopecki and Jody Shenn Jan. 23 (Bloomberg) -- Freddie Mac, the mortgage-finance company under federal control, said it will ask the U.S. Treasury Department for as much as $35 billion more in aid. Freddie, which took $13.8 billion from Treasury in November, said in a securities filing today that its fourth- quarter operating losses will again drive its net worth below zero. The McLean, Virginia-based company also said it settled a dispute over Washington Mutual loans with JPMorgan Chase & Co. The request comes as Freddie and Fannie Mae, the other government-sponsored enterprise, cope with the fallout from a slumping housing market that’s spurred a jump in delinquencies. Treasury officials have pledged as much as $100 billion to each to ensure solvency. The companies need aid if the value of their assets drops below the amount they owe on obligations. “Their losses are going to be much higher than anyone anticipated,” said Paul Miller, an analyst with FBR Capital Markets in Arlington, Virginia. “The more and more that people are digging into these portfolios, they’re finding out the more and more these guys were doing subprime and Alt-A loans and classifying them as prime.” Alt-A loans were made to borrowers with little or no income verification or to those with credit scores slightly above subprime. Washington-based Fannie, which hasn’t yet drawn on the Treasury backup funds yet, said in November that it may have to do so after reporting results for the fourth quarter of 2008. Fannie also said at that time that $100 billion may not be enough to keep it afloat. ‘Drop in the Bucket’ “Given that they have $4.5 trillion of risk out there, $100 billion is a drop in the bucket,” Miller said. “Given the fact that their risk profile on these loans is greater than they led everyone to believe, greater than $100 billion in losses on each institution would not surprise me.” Stefanie Mullin, a Federal Housing Finance Agency spokeswoman, declined to comment. Brian Faith, a Fannie spokesman, also declined to comment. FHFA Director James Lockhart, who regulates the companies, said in an interview yesterday that one or both companies may request federal aid after they report fourth-quarter earnings next month. “They will be reporting numbers in mid-to-late February and, yes, I think everybody would expect that there would be a draw on Treasury,” Lockhart said. The settlement with JPMorgan, which took over WaMu’s assets after the thrift collapsed in September, will allow the New York-based bank to retain WaMu’s mortgage-servicing contracts, according to the filing. ‘One-Time’ Payment In exchange, JPMorgan will assume WaMu’s obligations to repurchase any bad home loans that the thrift sold to Freddie with “recourse.” JPMorgan will make a “one-time” payment to cover other loans that WaMu would have been required to buy back because the mortgages failed to meet promises made to Freddie about their quality, according to the filing. The filing didn’t specify how much JPMorgan is paying Freddie. Sharon McHale, a Freddie spokeswoman, declined to offer more information about the terms of the JPMorgan deal. Thomas Kelly, a JPMorgan spokesman, declined to comment. To contact the reporter on this story: Dawn Kopecki in Washington at dkopecki@bloomberg.net. Last Updated: January 23, 2009 18:37 EST