Freddie Mac to sell stock, cut dividend |
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Tue, 27 Nov 2007 22:36
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NEW YORK (AP) - Freddie Mac halved its dividend and unveiled plans to sell $6 billion of preferred stock to bolster the mortgage investor's finances in anticipation of more losses, the company said Tuesday.Freddie Mac, which was chartered by Congress to buy home loans from mortgage lenders, will sell $6 billion of a special class of stock.The money raised through this sale will be used to buttress the company's balance sheet 'in light of actual and anticipated losses,' Freddie said in a statement.The company's board also declared a dividend of 25 cents for the fourth quarter, compared with a dividend of 50 cents in the third quarter. The company said it needed to slash the dividend to hold on to enough cash to maintain its financial flexibility and satisfy regulators.In 2004, Freddie Mac agreed with its regulator, the Office of Federal Housing Enterprise Oversight, to keep a cushion of cash handy to cover potential losses.Freddie Mac lost $2 billion in the third quarter because it needed to squirrel away money preparing for borrowers missing payments on their mortgages. Also, the company's book of mortgage contracts lost substantial value during this year's credit turmoil.Copyright 2007 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
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