By THE ASSOCIATED PRESS

Freddie Mac, the big provider of financing for residential mortgages, said Wednesday that its first-quarter loss widened to $151 million as the housing market worsened, though the results were not as poor as expected.

The company, based in McLean, Va., also said that it planned to raise $5.5 billion in new capital, following a similar move last week by Fannie Mae, its larger government sponsored sibling.

Moody’s Investors Service downgraded the company’s financial strength rating, projecting Freddie Mac will be hit with up to $7.5 billion in total losses from soured mortgages over the next two years.

Nevertheless, shares of Freddie Mac as investors anticipated that relaxed requirements by the company’s federal regulator will allow Freddie to play a larger role in the battered mortgage market.

Freddie Mac’s shares rose 8.6 percent in morning trading.

As a result of the planned stock sale, Freddie Mac’s federal regulator, the Office of Federal Housing Enterprise Oversight, said it would reduce the capital cushion the company has to maintain.

The regulator made a similar announcement last week for Fannie Mae, which is raising $6.5 billion to fortify its balance sheet after posting a $2.2 billion first-quarter loss.

Freddie Mac’s chief financial officer, Buddy Piszel, said the regulator’s move would allow Freddie Mac to buy mortgage securities at attractive prices.

Freddie will be required to keep 15 percent more capital than required by law, down from the current 20 percent mandate. Another five-point cut is expected to come in September, as long as the company stays in good standing with the regulator.

The quarterly loss at Freddie Mac was larger than a loss of $133 million in the first quarter a year ago. The results were equivalent to a loss of 66 cents a share, compared with 35 cents a share a year earlier.

It reported a $2.5 billion loss in the fourth quarter.

Freddie Mac said it had set aside $1.2 billion for losses as a result of rising mortgage delinquency rates, falling home prices and sales. Revenue in the period, however, rose to $1.53 billion from $694 million a year earlier.

Analysts surveyed by Thomson Financial had expected the government-sponsored company to lose 92 cents a share on average in the latest period.

One reason for beating the estimates, Freddie Mac said, was a change in how it accounts for the value of derivatives, the complex financial instruments it uses to hedge against swings in interest rates.

Freddie Mac said it set aside $1.2 billion for losses as a result of rising mortgage delinquency rates, falling home prices and sales. Revenue in the period, rose to $1.53 billion from $694 million a year earlier.

Mr. Piszel, however, cautioned that the company’s losses from mortgage problems are likely to last through 2009.

Freddie Mac is expecting total losses from bad mortgages and foreclosed properties to hit $3.1 billion this year, or 0.16 percent of the total value of mortgages the company guarantees. That was up from an earlier projection of 0.12 percent.

“We would have to acknowledge that credit is worse,” Mr. Piszel said.