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 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 approximately $1.4 trillion investment portfolios held by the government-sponsored enterprises. The bill creating a tougher regulator for the companies is currently stalled in the Senate.

The decline in 2005 income reported by Freddie Mac Tuesday fell below the company’s preliminary estimate of $2.5 billion on March 31.

The release is the first full, detailed report on annual earnings by Freddie Mac since its 2003 disclosures of understatements of net income. The company last year said it would start registering its common stock with the Securities and Exchange Commission after the report.

Freddie Mac’s regulator, the Office of Federal Housing Enterprise Oversight, may require the company to take new remedial steps, Chief Executive Richard Syron said Tuesday. The agency last week announced a limitation to the mortgage portfolio size of Fannie Mae in the wake of accounting mistakes at that company.

Freddie Mac stock was trading at $59.78 this afternoon, down $1.80 a share.

Show Comments Hide Comments


Sign up for Inman’s Morning Headlines
What you need to know to start your day with all the latest industry developments
By submitting your email address, you agree to receive marketing emails from Inman.
Thank you for subscribing to Morning Headlines.
Back to top
The best event in real estate kicks off next week! Tickets are selling quickly.Register Now×
Limited time: Get 30 days of Inman Select for $5.SUBSCRIBE×
Log in
If you created your account with Google or Facebook
Don't have an account?
Forgot your password?
No Problem

Simply enter the email address you used to create your account and click "Reset Password". You will receive additional instructions via email.

Forgot your username? If so please contact customer support at (510) 658-9252

Password Reset Confirmation

Password Reset Instructions have been sent to

Subscribe to The Weekender
Get the week's leading headlines delivered straight to your inbox.
Top headlines from around the real estate industry. Breaking news as it happens.
15 stories covering tech, special reports, video and opinion.
Unique features from hacker profiles to portal watch and video interviews.
Unique features from hacker profiles to portal watch and video interviews.
It looks like you’re already a Select Member!
To subscribe to exclusive newsletters, visit your email preferences in the account settings.
Up-to-the-minute news and interviews in your inbox, ticket discounts for Inman events and more
1-Step CheckoutPay with a credit card
By continuing, you agree to Inman’s Terms of Use and Privacy Policy.

You will be charged . Your subscription will automatically renew for on . For more details on our payment terms and how to cancel, click here.

Interested in a group subscription?
Finish setting up your subscription