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By Jennifer Yousfi
Freddie Mac (FRE) management is committed to putting shareholder interests ahead of the flagging housing market, according to the mortgage lender's Chief Executive Officer Richard F. Syron.
Speaking yesterday (Wednesday) before a group of analysts in New York, Syron reiterated his firm's commitment to its shareholders. He said the mortgage giant does not have plans to raise additional capital in order to take on more subprime mortgages despite how such actions might help the troubled housing market.
"It is not good public policy to have mission goals that encourage [Freddie Mac and Fannie Mae] to put people in homes that they end up losing," Syron said, according to The Washington Post. "We have to do things that make sense and will help the economy of the United States," not hurt it in the pursuit of "what could be unrealistic goals."
Increasing Freddie Mac's cash reserves would allow it to purchase additional mortgage-backed securities, but it would also add to the risk of its portfolio. That's a risk Syron is not willing to foist onto Freddie Mac shareholders.
Syron also forecasted that housing prices, which are already down 2.5% from their peak according to the Office of Federal Housing Enterprise Oversight, have further to fall. He estimated that home prices would eventually decline by 15% from their peak, MarketWatch reported.
Shares of Freddie Mac soared almost 16% on Tuesday, the day of the U.S. Federal Reserve's announcement that it would inject an additional $200 billion in liquidity into the crippled credit markets.
Patricia L. Cook, Freddie Mac's chief business officer addressed the Fed's plan to boost liquidity in today's briefing. She described the Fed's plan as "a short-term help" but added that "it doesn't solve the long-term problem."
"The longer term issue is where do those mortgages ultimately end up," she said.
Shares of Freddie Mac closed at $20.04 yesterday, down 12 cents for the day. The stock has traded in a range of $16.59 to $68.12 in the past 52 weeks.
News and Related Story Links:
- The Washington Post:
Freddie Mac Chief Resists Calls To Boost Capital
Freddie Mac sees home prices falling further
- Money Morning:
Fed Plan Sends Dow Soaring Over 400 Points