Secondary Market/Investors
Report: Freddie’s Subprime Losses Could Hit $5 Billion
By: PAUL JACKSON
November 19, 2007
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A Credit Suisse report released today said that Freddie Mac could report losses between $1 billion and $5 billion on its investment-grade subprime securities.
“While Freddie’s AAA subprime securities likely have substantial subordination, if the recent credit spread widening does not reverse over the coming quarters, we believe that Freddie could recognize an other-than-temporary impairment of between $1-5 billion,” the brokerage said in a research note.
The losses may force Freddie to sell some of its portfolio holdings or raise capital by issuing preferred stock, the note added.
Freddie’s shares fell nearly 8 percent today to close at $37.50, a new 52-week low.
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