Wednesday, August 6, 2008

Friedman cuts price target on Freddie Mac

Aug 6 (Reuters) - Friedman Billings Ramsey cut its price target on Freddie Mac (FRE.N: Quote, Profile, Research, Stock Buzz) to $5 from $7 to reflect continued pressure on capital from credit losses.

The brokerage kept its "underperform" rating on the stock and said "Freddie needs to raise capital today, not wait and hope for a chance to raise cheaper capital in the future."

Fresh capital would allow Freddie Mac to participate in the market to help stabilize the mortgage market and keep mortgage rates low, the brokerage added.

Freddie Mac's dividend cut and reduced portfolio growth may be insufficient to stabilize capital levels, it said.

Earlier in the day, Freddie Mac -- the second-biggest provider of U.S. residential mortgage funding -- posted its fourth straight quarterly loss and said it plans to slash its dividend by at least 80 percent.

Separately, the mortgage finance source's chief business officer Patti Cook said Freddie Mac is at an early stage of eventual credit losses on its home-loan investments even though the market downturn might have hit its mid-point.

Freddie Mac shares were trading down more than 16 percent at $6.73 in afternoon trade on the New York Stock Exchange. (Reporting by Jennifer Robin Raj in Bangalore; Editing by Himani Sarkar)

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