Freddie Mac, the No. 2 U.S. mortgage finance company, on Thursday reported an unexpected net loss of $211 million for the first quarter, citing a souring outlook for mortgage credit risk that widened credit spreads.
The loss contrasts with a net gain of $2 billion the company reported for the same period in 2006.
The company reported a net share loss of 46 cents in the first quarter. Excluding unusual items, Freddie Mac was expected to show a profit of $1.09 per share in the first quarter, according to Reuters Estimates.
With this report, Freddie Mac returns to timely quarterly financial reporting for the first time since its 2003 accounting scandal, which led to a $5 billion restatement of past earnings.
The company said mark-to-market losses tied to the wider credit spreads on the mortgages' assets in its portfolio was the main driver of the first-quarter loss.
Freddie Mac also said its fair value, before capital transactions, fell by about $300 million because of the credit spread widening.
"Overall, Freddie Mac's credit guarantee portfolio continued to exhibit credit characteristics that were better than historical averages as measured by current delinquencies, loan-to-value rations and charge-offs," the company said in a release.