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Shares in Freddie Mac lost almost a quarter of their value today after the mammoth American mortgage giant plunged into a $2 billion (£970 million) quarterly loss and hired Lehman Brothers and Goldman Sachs to explore “very near term” opportunities to raise cash. More than $4.4 billion was wiped off Freddie Mac’s market value, as the shares tumbled almost $9 to $28.59. Freddie Mac, which offers loan guarantees for American homebuyers and is a heavy user of the wholesale credit markets, said that it was “seriously considering” cutting its fourth-quarter dividend in half. The group’s largest quarterly loss in history, which ballooned from $715 million over the same period last year, underscores the crisis in the American sub-prime mortgage market. It comes amid increasing signs that the international credit crunch that it prompted will spill over into next year. Freddie Mac revealed that it had set aside $1.2 billion to cover bad and doubtful debts for the three months to the end of September as struggling American homeowners began to default on their mortgage loans. It also wrote down $3.6 billion in assets. Richard Syron, the chairman and chief executive, said: “Without doubt, 2007 has been an extremely difficult year for the country’s housing and credit markets and, as our third-quarter financial results reflect, we have been impacted by the deterioration in these markets.†Freddie Mac, like its peer group Fannie Mae, buys mortgages from other lenders as part of its Government-backed brief to try to reduce homebuying costs form American households. Under a regular programme of securities issuance, Freddie Mac also packages up these securities and sells them on into the wholesale markets. Meanwhile, the chief executive of H&R Block became the latest casualty in the growing list of US sub-prime mortgage casualties when he announced his resignation today, only two week’s after the American financial services group’s finance director stepped down. Mark Ernst will step down immediately at the Kansas-based financial group but will remain at H&R Block as a consultant. Richard Breeden, a former US Securities and Exchange Commission chairman, is taking over as interim chairman of H&R Block. Mr Breeden led the investigation into Lord Black of Crossharbour, the former Telegraph Group proprietor and convicted fraudster. The group has lost millions of dollars through Option One Mortgage, its sub-prime mortgage provider, as more and more borrowers with poor credit histories default on their home loan repayments. H&R Block has been trying to sell the division to Cerberus, the US private equity group, which walked away yesterday from making an offer for Northern Rock, the troubled British mortgage lender. William Trubeck, the chief financial officer of H&R Block, stepped down this month and was replaced by Becky Shulman, the treasurer of the group, until a replacement is found. By: Miles Costello and Dearbail Jordan From: http://business.timesonline.co.uk/ 4 Comments for 'US mortgage crisis claims new casualties'Leave a comment |
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