Further loss for mortgage giant

Freddie Mac's loss was smaller than analysts expected

Freddie Mac, the second-biggest provider of US mortgage financing, has reported another loss as the domestic housing market slump persists.

It posted a loss of $151m (£77.6m) in the first three months of 2008, compared with a shortfall of $2.5bn in the fourth quarter of 2007.

Freddie Mac shares rose 9% as the loss was smaller than analysts had expected, due to an accounting change.

It said it also plans to raise $5.5bn to strengthen its finances and expand.

"Market and credit conditions remained challenging during the first quarter of 2008," said Richard Syron, Freddie Mac's chairman and chief executive officer.

Mr Syron said that Freddie Mac "on the whole" had a better first quarter than the third and fourth quarters of last year.

"We showed strong momentum in market share, business volumes, margins and total revenue," he said.

More losses

Freddie Mac set aside $1.2bn for losses as a result of rising mortgage delinquency rates, falling home prices and sales.

Ratings agency Moody's forecasts that Freddie Mac will be hit with up to $7.5bn total losses from soured mortgages over the next two years.

The firm, together with Fannie Mae, was created by the US government to make it easier for more people to get on the housing ladder.

They were later privatised, but are still known as government-sponsored enterprises and are able to borrow at a lower rate of interest, because bond markets believe that they would not be allowed to go bankrupt.

As many private sector banks look to reduce their mortgage business, the US government has increasingly looked to Fannie Mae and Freddie Mac to step up and help restore stability to the market.