Freddie Mac’s earnings dropped nearly 60 percent in the first half of the year as the mortgage giant emerged from its accounting crisis, the mortgage giant reported Wednesday.

The second-largest U.S. buyer of home mortgages reported that its net income fell to $1.64 billion, or $2.22 a share, in January through June 2005, from $4.07 billion, or $5.74 a share, in the same period last year.

The government-sponsored enterprise has been working to straighten out a $5 billion misstatement of earnings for 2000-2002. Freddie Mac had not turned in a quarterly financial report since it discovered the accounting problems in June 2003.

The earnings report was issued after the close of regular trading.

Freddie Mac said the earnings decline was due mainly to a drop in interest income and to losses from changes in the value of financial instruments, known as derivatives, that it uses to hedge against interest-rate and other risk.

Interest income is expected to continue to decline this year, the company said.

The earnings decline in the first six months had been expected by financial analysts.

“We are making excellent progress on improving the business in ways that will both advance our housing mission and reward our stockholders,” Richard Syron, Freddie Mac’s chairman and chief executive officer, said in a statement.

Both the White House and Federal Reserve Chairman Alan Greenspan say Fannie Mae and Freddie Mac pose a risk to the economy because they have grown too large. Legislation to curb the companies’ mortgage holdings is currently under consideration in Congress.

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.

Fannie Mae’s financial accounting troubles have drawn shareholder lawsuits and investigations by the Justice Department and the Securities and Exchange Commission.

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