Freddie may draw additional $35 billion from Treasury

NEW YORK (Reuters) - Freddie Mac , the second-largest provider of funding for U.S. home loans, on Friday said expected fourth-quarter losses may force it to draw up to $35 billion from the U.S. Treasury to maintain a positive net worth.

The estimated draw means Freddie Mac may post a loss exceeding the record $25.3 billion for the third quarter, which reduced shareholder's equity to a negative $13.8 billion. The Treasury closed the deficit with a purchase of senior preferred stock, a facility formed by the government as it seized Freddie Mac and rival Fannie Mae in conservatorship in September.

The amount of the capital infusion "reflects management's current estimate of the impact on the company's net worth in the fourth quarter," Freddie Mac said in a filing with the Securities and Exchange Commission.

Freddie Mac would be using about half of its $100 billion Treasury lifeline that was put in place to ensure the company can continue its role as provider of funds for U.S. housing, which is in its worst downturn since the 1930s. Other sources of funding have shriveled in the credit crunch, enhancing the importance of Freddie Mac, Fannie Mae and the Federal Home Loan Banks.

Freddie Mac's fourth-quarter results will likely show risky mortgages held in portfolio drove losses, Barclays Capital analyst Rajiv Setia said this week. But increased delinquencies on loans earmarked for Freddie Mac's guaranteed mortgage security business have also deepened the loss, he said.