Embattled mortgage guarantor Freddie Mac (FRE) today, released its financial results for Q2 2008. The company posted a Net loss for the period of $821 million or $1.63 per diluted share. For the same period last year, the company realized a profit of $729 million or $0.96 cents per share. Analysts were expecting a loss of $0.41 for Q2 2008. This was the fourth consecutive quarterly loss by the company.

Interest Income came in at $1.69 billion, compared to $2.34 billion from the same period last year. The company’s poor performance in the second quarter, was directly correlated to the malaise that is affecting the housing market. According to the company, “While market and credit conditions remained very challenging during the second quarter, as demonstrated by our increased credit-related expenses and impairments on non-agency mortgage-related securities, our credit guarantee business and mortgage portfolio both saw strong, high quality growth.”

Because of the credit challenges faced by the company, the company had credit related expenses in Q2 2008 of $2.8 billion, while setting aside $2.5 billion as a provision for credit losses.

To better manage its cash flow, Freddie Mac (FRE) is cutting its dividend to $0.05 per share starting in the third quarter. The dividend was $0.25 in Q2.

After the earnings release, ratings agency Fitch Ratings, cut the rating of Freddie Mac’s (FRE) preferred stock by one level, from “A-plus” to “A” which is the sixth highest rating.