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The stock dropped nearly 16%, declining $1.63 to $11.97 a share by 10:30 am Eastern Time. Shares of the McLean, Virginia-based company gave back most of Tuesday's gains.
Before the opening bell on Wednesday, Freddie Mac reported a second quarter net loss of $821 million or $1.63 per share, compared to a profit of $729 million or $0.96 per share in the previous year.
On average, 10 analysts polled by First Call/Thomson Financial expected a loss of $0.53 per share for the quarter.
The provision for credit losses was $2.5 billion in the quarter, wider than $1.2 billion recorded in the first quarter of 2008, reflecting increases in delinquency rates, foreclosures and estimated severity of losses driven by continued declines in home prices.
Total revenues in the quarter fell to $1.69 billion from $2.34 billion a year ago. Analysts estimated revenues of $2.18 billion.
"Freddie Mac was created to ensure the continued flow of funds to America's homebuyers, and we are pleased to be fulfilling that important mission," said Richard F. Syron, chairman and chief executive officer. "At a time of severe stress in the housing and credit markets, we are successfully providing critical liquidity and stability."
Further, Freddie Mac reaffirmed its commitment to raise capital. The company also announced its current expectation, subject to approval by the Board of Directors, to reduce the third-quarter common stock dividend from $0.25 to $0.05 or less per share and to pay the full dividends at contractual rates on its preferred stock.
On Tuesday, Freddie Mac, along with several other financial institutions around the country, were asked by U.S. lawmakers to put a voluntary stop on any additional foreclosures in the coming months before the new housing legislation can be implemented.
Massachusetts Rep. Barney Frank, California Rep. Maxine Waters and North Carolina Reps. Mel Watt and Brad Miller, all Democrats, asked mortgage services to postpone any foreclosures and review loan documents and prepare to refinance those who qualify to be ready for the October 1 start date for the FHA "Hope for Homeowners" refinance program.
The legislators also asked the mortgage service providers three questions in the letter and requested formal answers by August 31. The lawmakers are asking whether or not the organizations will be preparing for the October 1 start date, whether they will make the reductions necessary to qualify for refinancing at-risk borrowers into the program, and if their service practices provide a previous loan modification that will not disqualify a borrower from receiving further assistance.
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