Industry News

Freddie Mac issuing $6 billion in stock to raise capital

Mortgage repurchaser bumping up against regulatory limits
Published on Nov 28, 2007

Freddie Mac will issue $6 billion in preferred stock and cut fourth-quarter dividends to shareholders in an effort to maintain mandatory capital surpluses, the mortgage repurchaser said Tuesday. The announcement came one week after the McLean, Va.-based mortgage repurchaser reported a $2 billion third-quarter loss, and said a requirement that it maintain a 30 percent capital surplus forced it to sell $45 billion in loans in September and October. In reporting third-quarter earnings, Freddie Mac estimated its core capital at $34.6 billion as of Sept. 30 -- just $600 million above the 30 percent capital surplus set by OFHEO. Freddie Mac officials said at the time they had hired Goldman Sachs & Co. and Lehman Brothers Inc. to advise them on ways to raise additional capital, including limiting the growth or reducing the size of the company's retained mortgage portfolio, slowing purchases into the credit guarantee portfolio, or issuing preferred or common stock. The capital raised by issui...

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