Freddie Mac profits fall 45 percent

WASHINGTON (Map, News) - Second-quarter profits at Freddie Mac, the McLean-based home lending giant, fell 45 percent after the company was forced to spend $320 million to cover losses on bad loans in 2006 and 2007.

Despite the losses, the company said its default rates were still below the national average.

“On the credit front we are seeing weakening, but we are well positioned relative to the overall marketplace to weather the ongoing disruptions in the mortgage markets and emerge as an even stronger player,” Freddie Mac Chief Executive Officer Richard Syron said in a conference call announcing the results. “Most important, we are working with our regulator, our customers and others to do our part in developing a market oriented response that will help provide stability, liquidity and affordability to the national housing and mortgage markets.”

The firm, along with Fannie Mae, was created by the federal government to infuse cash into the housing market to make it easier to purchase homes.

In recent months, as the subprime market failure has caused uncertainty on Wall Street, both companies have asked for Congress to ease regulations that would allow them to buy more subprime mortgages in an effort to help home owners refinance.

Democrats called for a loosening of restrictions, while the White House rejected the idea.

Federal Reserve Chairman Ben Bernanke joined the White House in its opposition this week.

In a letter to Sen. Chuck Schumer, D-N.Y., Bernanke said the two companies could deal with the weak market without easing restrictions.

“The GSEs [referring to Freddie Mac and Fannie Mae, both government sponsored enterprises] should be encouraged to provide products for subprime borrowers to the extent permitted by their charters,” he wrote.

dfrancis@dcexaminer.com