MCLEAN, Va. — Freddie Mac, the U.S. mortgage-finance company that lost a record $2 billion in the third quarter, may be downgraded by Moody’s Investors Service because damage from loan defaults could be worse than the ratings company expected.
Moody’s threatened to lower Freddie Mac’s financial- strength rating from A-, the second-highest grade, which may prompt the government-chartered company to raise additional capital. Freddie Mac’s Aaa senior long- term-debt rating and Prime-1 rating for its commercial paper or short-term IOUs won’t be cut, Moody’s said.
Rising mortgage defaults forced chief executive Richard Syron to shore up Freddie Mac’s finances by selling $6 billion of preferred stock in November, slicing the dividend by 50 percent and reducing mortgage assets by 4 percent to $701.4 billion in the three months ended Nov. 30.
Freddie Mac “may experience higher credit losses than Moody’s previous expectations,” Moody’s analysts led by Brian L. Harris in New York said in the report late Wednesday. “In its review, Moody’s will focus on Freddie Mac’s asset quality and the potential that the company may experience an elevated level of credit charges over the near to medium term.”
