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Last Updated: Tuesday, 27 November 2007, 23:10 GMT
Freddie Mac in $6bn share issue
New York apartments
Freddie Mac is one of America's largest mortgage lenders
Freddie Mac, the company that provides financing and guarantees to US mortgage lenders, is to sell $6bn (2.9bn) of shares to cover more bad debt losses.

It said the money was needed "in light of actual and anticipated losses".

The move comes only a week after Freddie Mac said it was setting aside 1.2bn to cover bad debts for the three months from July to September.

Most of the main US lenders have now revealed exposure to bad mortgage debt centred on the sub-prime sector.

Higher mortgage rates

The ongoing US mortgage industry crisis has been caused by record loan defaults in the sub-prime sector, which specialises in higher risk loans to people on lower incomes or those with poor credit histories.

The record defaults over the past year have been sparked by higher US mortgage rates.

This has subsequently spread to the wider credit markets, as most of the sub-prime mortgage debt was repackaged into wider debt offerings which were then sold on.

Freddie Mac said it was also halving its dividend for the last three months of 2007 to 25 cents per share, compared with 50 cents in the third quarter.

The firm was created in 1970 by the US government, but later privatised.

It is the second largest buyer and guarantor of home loans in the US.

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