NEW YORK—Moody's Investors Service said Thursday it is considering slashing Freddie Mac's financial strength rating because of bad credit in the mortgage investor's portfolio.
Moody's placed Freddie Mac's "A-" bank financial strength rating on review for possible downgrade because credit losses may exceed expectations, the ratings agency said.
Chartered by Congress, Freddie Mac buys mortgage loans and sells them as bonds. The company guarantees the payments on $1.7 trillion in mortgages, and much of the reason Freddie Mac lost $2 billion in the third quarter is an expectation it will have to cover more unpaid home loans.
The company recorded $4.6 billion in credit costs over the first nine months of 2007, and its stock has lost almost 60 percent of its value in a year.
Moody's plans to review expectations for credit losses and how Freddie Mac is preparing for them. The ratings agency will also take into account how much money Freddie Mac is preserving by selling $6 billion in stock and cutting its dividend by 50 percent.
Shares of Freddie Mac slipped 84 cents, or 3.1 percent, to $26.30 in morning trading Thursday. The stock is down 23 percent since the start of 2008.
