Freddie Mac today said it would delay the release of its quarterly and full-year 2005 financial results by two months to implement an accounting change, but said the change would not affect prior results.
Freddie Mac said it would report quarterly and full-year 2005 results in May. The government-sponsored enterprise had previously planned to report those results by the end of March.
The second-largest U.S. mortgage funding company’s earnings have not been current since a 2003 accounting scandal resulting in a $5 billion earnings restatement and management overhaul.
Both Freddie Mac and its fellow government-sponsored enterprise, Fannie Mae, have been rocked by accounting scandals. In December 2004, Fannie Mae replaced Franklin Raines, its chairman and CEO, who announced he was taking early retirement, and Fannie Mae’s chief financial officer, Timothy Howard, resigned Dec. 21.
In early February of this year, the Bush administration said Congress should create a new regulator for Fannie Mae and Freddie Mac and direct it to cut the $1.4 trillion investment portfolios held by the government-sponsored enterprises.
Freddie Mac said it hopes to return to regular financial reporting by the end of the year.
Freddie said it will implement a change in its method for determining the estimated fair values of its guarantee assets and guarantee obligations. The company recently decided to make greater use of third-party market information in its method for valuing those assets.
The change will be applied to results starting with 2005. It will not affect previously reported results for 2004 or prior, the company said.
“The valuation improvement we are implementing will further increase the accuracy and transparency of our 2005 results and will help us meet our ultimate financial reporting objectives,” said Gene McQuade, Freddie’s president and chief operating officer.
Freddie Mac said its work is not finished in fixing its financial reporting infrastructure.
The company will hold a conference call with investors on March 30, Freddie Mac said.
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