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Freddie Mac on Monday said Chief Executive Officer David Moffett is quitting just six months after being named to the post as the government forced the No. 2 U.S. mortgage finance company into conservatorship.
Freddie Mac in a statement said Moffett wants to return to the financial services industry, where he worked from 1993 to 2007 as vice chairman and chief financial officer of U.S. Bancorp. Before 1993, he worked at BankAmerica and Security Pacific.
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McLean, Virginia -based Freddie Mac is facing another year of steep losses as the housing downturn accelerates, and as the government boosts its use of the company and rival Fannie Mae to refinance loans and stop foreclosures.
Freddie Mac and Fannie Mae have said that foreclosure prevention efforts could worsen the credit profiles of their portfolios in 2009.
Freddie Mac reiterated that it expects its regulator will ask the Treasury for $30 billion to $35 billion in capital to maintain a positive net worth after the company files its 2008 annual report with the Securities and Exchange Commission.
"Whatever the reason Mr. Moffett has determined to leave, the abrupt departure with no replacement in hand is a negative indicator for the company," Jim Vogel, a strategist at FTN Financial Capital Markets in Memphis, Tennessee.
President Barack Obama last month outlined a home refinancing and foreclosure prevention plan that relies heavily on Freddie Mac and the larger Fannie Mae. At the same time, the Obama administration doubled its capital commitment to the companies to $400 billion.
"Management dysfunction" at Freddie Mac, which holds $799 billion in mortgages and guarantees $1.8 trillion of MBS, could reach levels bothersome to investors, Vogel said. But remaining management and government protections to the company's debt securities may yet underpin Freddie Mac's debt, he said.
Risk premiums on Freddie Mac's two-year debt increased about 3 basis points on Monday to 49 basis points above similar Treasury securities, according to TradeWeb and Reuters Pricing Service data.
James Lockhart, director of the Federal Housing Finance Agency, the companies' regulator, said he would work with Freddie Mac to ensure a smooth transition in leadership.
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