Freddie Mac sees $12bn credit hit

It now expects $10bn (£4.89bn) to $12bn in credit losses on its mortgage book, its chief executive told investors.

A string of banks have registered losses because of their exposure to investment products linked to US sub-prime mortgages.

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

"We would expect that our total future credit losses on our current book of business would total approximately between $10bn and $12bn, " Richard Syron, chief executive told investors.

Freddie Mac's share price

Shares in Freddie Mac slid more than 5% on the news to $33.07.

Trickle of losses

Last month, the firm set aside $1.2bn (£580m) to cover bad debts between July and September and reported a $2bn loss.

Freddie Mac then announced that it would sell $6bn of shares to cover more bad debt losses.

"Our fourth quarter results are not going to be effectively better than they were in the third quarter," Mr Syron told investors at a conference in New York.

"We are not promising a silver bullet, a short-term quick fix."

Freddie Mac was created in 1970 by the US government, but later privatised.

Investors, however, rate its bonds as if they were still backed by a government guarantee.

Its fellow government-sponsored lender, Fannie Mae, has also admitted big losses in the credit crisis.

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