Freddie Mac files with SEC; first step to capital

By Patrick Rucker and Al Yoon

NEW YORK (Reuters) - Freddie Mac crossed a key hurdle on Friday to raise capital needed to help it overcome increasing losses, after the Wall Street Journal reported the mortgage finance titan is considering selling as much as $10 billion in stock.

The company issued preliminary filings with the Securities and Exchange Commission, taking the step to raise $5.5 billion in capital, which it had promised its regulator. An approval of the filings from the SEC could come later on Friday.

Shares of Freddie Mac and rival Fannie Mae were up a third consecutive day, by 5.8 percent and 11 percent, respectively. Sentiment in financial shares in general were buoyed by a smaller-than-expected quarterly loss from Citigroup Inc.

As the U.S. housing market goes through its worst downturn since the Great Depression, lawmakers and regulators increasingly have come to rely on Freddie Mac and Fannie Mae, which together own or guarantee more than $5 trillion in U.S. mortgages, to stabilize the situation.

Investors have been concerned for weeks that the two companies would need huge amounts of capital to offset burgeoning losses from delinquent borrowers and rising foreclosures, and to maintain their role in supporting the housing market.

Their shares have been dumped accordingly, and the ensuing drop in the companies' market value also hurt their ability to raise capital, which was announced more than two months ago.

"This is our registration to formally file our common stock," a spokesman for the McLean, Virginia-based company said. The timing of a capital raise, which will include common and preferred stock, depends on market conditions and approval by Freddie Mac directors, he added.

Freddie Mac in its filing said it expects to "take actions" to maintain capital above required minimums.