Freddie to adjust mortgage-purchase threshold

NEW YORK (Reuters) - Freddie Mac expects to purchase mortgages with significantly higher unpaid principal balances, the U.S. mortgage finance company said in a filing with the Securities and Exchange Commission on Friday.

The struggling company also said in the filing that realized credit losses will continue to increase, reducing the profitability of the single-family guarantee segment of the market.

"We expect the increase will be largely driven by the credit characteristics of loans originated in 2006 and 2007, which are generally of lower credit quality than loans underlying our issuances in prior years," it said.

Over the last two days, shares of Freddie Mac recovered some of the deep losses they suffered last week. The Wall Street Journal reported on Friday that Freddie Mac is considering a $10 billion share sale to raise capital.

In the filing, the company also said it would seek to increase fees to better reflect its expectations of future default costs.

Freddie Mac added it will cut administrative expenses over the next two years, beginning in 2008.

(Reporting by Jonathan Spicer; Editing by Steve Orlofsky)