Industry News

Freddie Mac’s 2005 earnings down

Decline attributed to lawsuits, Katrina, accounting changes

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Mortgage giant Freddie Mac said Tuesday that profit fell to $2.1 billion, or $2.75 a share, in 2005, compared with $2.9 billion, or $3.94 a share, in 2004. The McLean, Va.-based government-sponsored enterprise said the decline was primarily caused by $600 million of costs associated with a settlement of shareholder lawsuits, charges related to Hurricane Katrina and the net impact of certain accounting changes. In its report, Freddie Mac also said its regulator might limit the growth of its portfolio of home loans. The mortgage finance company is recovering from $5 billion in accounting mistakes. Freddie Mac has been in hot water since 2003 when it disclosed that it understated net income to minimize earnings volatility. In 2004, accounting irregularities at Fannie Mae, Freddie's sister government-sponsored enterprise, were discovered to the tune of some $10.8 billion. In December 2004, Fannie Mae replaced Franklin Raines, its chairman and CEO, who announced he was taking early retire...