Freddie Mac loses $2 billion, seeks capital

Freddie Mac (NYSE: FRE) reported a larger than expected $2 billion loss, which sent its stock tumbling in premarket trading, down $6.55 as of 8:56 a.m. EST from yesterday's close of $37.50. Freddie's cash position is so tight that it's already signed with Goldman Sachs (NYSE: GS) and Lehman Brothers (NYSE: LEH) for help in raising cash, according to the New York Times this morning.

This bad news shows the mortgage mess is spilling over from the riskier subprime fiasco to more traditional mortgages as home prices drop, gas and health care costs rise, salaries are stagnant and people are stretched to the breaking point financially. While in past years people may have refinanced and taken out more cash to help get through a rough patch, that avenue no longer exists.

According to the AP, Freddie Mac's board is "seriously considering" cutting its dividend in half for the fourth quarter. As a government chartered enterprise, Freddie Mac does not have to keep as much cash on hand as other lenders do, so when it reports a $2 billion loss with $1.2 billion in bad home loans, it quickly faces a cash crisis. Buddy Piszel, chief financial officer, told the AP, "We have begun raising prices, tightened our credit standards and enhanced our risk management practices. We also continue to improve our internal controls."

Fannie Mae (NYSE: FNM) also reported losses, which means mortgage money will get even tighter than it already is. Freddie and Fannie have taken up much of the slack as private investors have run from the mortgage market. Tighter lending will make it harder for people to get loans, which in turn will make it even more challenging to sell a home.

Lita Epstein has written more than 20 books including "The 250 Questions You Should Ask to Avoid Foreclosure" and the Complete Idiot's Guide to Improving Your Credit Score."