WASHINGTON/NEW YORK - FREDDIE Mac won approval from regulators to sell the stock needed to overcome mounting losses, and the Wall Street Journal said the mortgage finance company may seek US$10 billion (S$14 billion).

The approval on Friday clears the way for the company to fulfill its promise in May to raise US$5.5 billion to bolster its balance sheet, allowing it to continue its support of the deflating United States housing market.

Freddie Mac in its filing said it expects to 'take actions' to maintain its required capital, which has been eaten away by rising defaults among the trillions of dollars of mortgages that the company guarantees.

That helped send shares of Freddie Mac and rival Fannie Mae higher for a third straight day, climbing 12 per cent and 23 per cent, respectively.

Lawmakers and regulators increasingly have come to rely on Freddie Mac and Fannie Mae to stabilise the worst US housing downturn since the Great Depression by buying loans from lenders and providing a dependable source of mortgage finance.

Investors have been concerned for weeks that the two companies would need expansive amounts of capital to offset burgeoning losses from delinquent borrowers and record foreclosures.

'We continue to review and consider alternatives for managing our capital including issuing equity in amounts that could be substantial, reducing our common dividend and limiting the growth or reducing' portfolio investments, it said.

Freddie Mac said it is not under any mandate to raise more than the US$5.5 billion, and that expected second quarter financial results suggest it will have enough capital. Its safety and soundness regulator, the Office of Federal Housing Enterprise Oversight, said it was pleased with Freddie Mac's registration and its commitment to capital was appropriate.

'While this is encouraging, as it means that there does not appear to be a large loss (in the second quarter) that would have required a larger capital raise, we would note that weaker credit results will pressure near-term results,' Credit Suisse analyst Moshe Orenbuch said in a research note.

Investors have rushed to sell shares in Freddie Mac and Fannie Mae in recent weeks amid concern of shareholder dilution. The plunging stock prices means the companies would have to sell a greater number shares to raise the same amount of capital.

The timing of the sale of shares, which will include common and preferred stock, depends on market conditions and approval by Freddie Mac directors, a Freddie Mac spokesman said. Dealers were gauging investor interest on Friday, an investor said. -- REUTERS