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Government sponsored mortgage lender Freddie Mac said Thursday it lost $0.46/share in Q1 2007, having made $2 billion in the year-ago quarter. Analysts were looking for EPS of $1.01. It was the company's third straight quarterly loss. The company blamed the surprise loss on mark-to-market trading losses in its derivatives portfolio, losses on its single-family credit guarantees, and credit-spread widening. It is the first quarter in which the company has reported since a 2003 accounting scandal. In February Freddie Mac said it will cease buying subprime mortgages and those with a "high likelihood" of default. Freddie Mac and its larger competitor Fannie Mae have about $170 billion in subprime mortgage-backed securities. It its press release, CEO Richard Syron said: "While the full impact of the housing downturn has not been felt, our credit position has remained strong Freddie Mac 14 06 2007 Chartrelative to our historical levels and the market as a whole." CFO Buddy Piszel commented on the EPS loss: "While significant mark-to-market losses on our portfolio of derivatives, which are used to hedge our interest-rate risk, and on our credit guarantee activities have resulted in a GAAP loss, we remain encouraged with the underlying fundamentals of Freddie Mac's business." Shares are down 2.3% YTD, but are up 15.3% over the past year.

Sources: Press release, Bloomberg, MarketWatch
Commentary: Another Perfect Storm Brewing: Government Underwritten Contingent LiabilitiesFannie, Freddie and WaMu Spearhead Subprime Borrower HelpHousing Double Dips Offer Short Opportunities
Stocks/ETFs to watch: Freddie Mac (FRE). Competitors: Fannie Mae (FNM)

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Source: Freddie Mac Misses on Trading, Credit Guarantee Losses

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