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Fannie Mae and Freddie Mac, the mortgage-finance companies under government control, are reporting fourth-quarter losses after writing down the value of tax credits and setting aside money for housing-market losses.

Freddie Mac posted a $6.5 billion net loss as it marked down $3.4 billion in low-income housing tax credits that the U.S. Treasury Department barred the McLean, Virginia-based company from selling, according to a filing today. Fannie Mae, which plans to report official results this week, said it’s taking a $5 billion charge for the same reason.

Capping a “trying and turbulent year” with $7.1 billion in credit losses and foreclosure-related expenses, as well as $5.2 billion in annual dividends owed to the Treasury for emergency aid, Freddie Mac said there can be “no assurances regarding when, or if, we will return to profitability.” Regulators seized the company, along with Fannie Mae, in 2008 as mortgage delinquencies rose.

“We start 2010 with some early signs of stabilization in the housing market, with house prices and home sales likely nearing the bottom sometime in 2010,” Freddie Mac Chief Executive Officer Charles Haldeman said in a statement. “Still, the housing recovery remains fragile, with significant downside risk posed by high unemployment and a potential large wave of foreclosures.”

More Treasury Aid

Freddie Mac, which buys mortgages and guarantees home-loan securities, has tapped $50.7 billion in Treasury preferred stock investment since November 2008 to remain solvent. While Freddie Mac avoided having to take more federal aid for a third straight quarter, the company said new accounting rules that took affect Jan. 1 will reduce its net worth by about $11.7 billion in the first quarter and require going back to for more aid.

Freddie Mac’s fourth-quarter net loss narrowed from $23.9 billion the company said in its filing with the Securities and Exchange Commission. The loss adds to $68.6 billion in cumulative net losses for eight of the previous nine quarters amid a three- year housing slump that has wiped 28 percent off home values.

A record 3 million U.S. homes will be repossessed by lenders this year as unemployment and depressed home values leave borrowers unable to make their house payment or sell, according to a RealtyTrac Inc. forecast last month. Last year there were 2.82 million foreclosures, the most since the Irvine, California- based company began compiling data in 2005.

Freddie Mac shares, which peaked at $73.70 in December 2004, was unchanged at $1.20 at 9:55 a.m. in New York Stock Exchange composite trading. Fannie Mae was up less than 1 cent at $1.

Tax Credits

The Treasury and the companies’ regulator, the Federal Housing Finance Agency, blocked Freddie Mac and Fannie Mae from selling their low-income housing tax credits, which can only be recognized if the companies expect to be profitable.

The Treasury found that an agreement Fannie Mae had to sell about half of its credits would have cost taxpayers more than the company would gain from the deal, according to a November letter to that company. The credits can be applied to profits to lower the amount of taxes owed. Because Fannie Mae hasn’t been profitable in almost three years, the company had sought to sell the credits to a business that could take advantage of the tax benefits.

Fannie Mae, the largest U.S. mortgage-finance company, has posted $120.5 billion in net losses in the nine quarters ended in September and requested $59.9 billion in Treasury aid.

Housing Prices

Freddie Mac and Fannie Mae, now own or guarantee more than $5 trillion in U.S. residential debt, and were responsible for as much as 75 percent of the new mortgages made last year.

Losses at Freddie Mac are likely to grow with rising unemployment and costs to implement President Barack Obama’s housing plans, the company said.

Fannie Mae and Freddie Mac survived last year on $200 billion each in emergency financing pledged by the Treasury after regulators put the two in conservatorship in September 2008. The Treasury on Christmas Eve raised that lifeline to an unlimited amount through 2012. The U.S. government makes the payments through preferred stock purchases when the value of the companies’ assets drop below the amount owed on their obligations.

Freddie Mac’s draws from the Treasury carry a 10 percent annual dividend of about $5.2 billion, according to today’s regulatory filing. The amount exceeds the company’s annual historical earnings in most periods and “could contribute to the need for additional draws from Treasury,” Freddie Mac said. The company said its ability to repay Treasury is limited and “we may not be able to do so for the foreseeable future, if at all.”

Credit Quality

The credit quality of loans and mortgage bonds that Freddie Mac owns or guarantees has continued to deteriorate as a recession that began in December 2007 pushed more homeowners into foreclosure.

Freddie Mac’s net worth, or the difference between assets and liabilities, was $4.4 billion in the fourth quarter, compared with $9.4 billion in the third quarter. The decrease reflected a rise in delinquencies and foreclosures, Freddie Mac said.

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Tags: Finance, Tax Credit