Freddie Mac / FRE

About Freddie Mac

8200 Jones Branch Dr., McLean, Va. 22102
www.freddiemac.com | 703-903-2000 | Founded: 1970

Industry: Financial Services | Category: Top 100 Companies

Two years after an accounting scandal led to the ouster of top executives, Freddie Mac, the Federal Home Loan Mortgage Corp., spent much of 2005 getting back to business.
But accounting problems and glitches continued. In November, the company said it would have to revise its stated profit for the first half of the year downward by $220 million, to $1.4 billion, because of faulty software. And March 10, Freddie Mac said it would delay the release of its 2005 financial results until this month so it could continue improving its reporting methods. "We have made substantial progress in fixing our financial reporting infrastructure, but our work is not done," said Martin F. Baumann, departing chief financial officer.
On March 31, the company estimated that once it was able to report results it would show $2.5 billion in profit for 2005, down 11 percent from $2.8 billion in 2004. The company attributed the drop in earnings mainly to a decline in interest income from its investment holdings of mortgages and mortgage-backed securities.
The company was more successful on other fronts. The McLean company increased its share of the mortgage-backed securities market to slightly higher than pre-scandal levels. It also grew its investment portfolio, which generates interest income.
However, Freddie's share of the overall mortgage market has shrunk, as other players, in particular large banks, have gone into the mortgage securitization business and as consumers have become more comfortable with adjustable-rate mortgages. That may change as interest rates rise and more consumers switch back to 15- and 30-year fixed-rate mortgages, Freddie's bread-and-butter business.
Then there were acts of nature. Hurricanes Katrina and Rita racked up $300 million in losses for Freddie. The company pitched in to help affected homeowners, with plans to buy $1 billion worth of bonds from state and local housing finance agencies. By accepting a below-market rate of return on the bonds, the purchase will allow cut-rate financing for homeowners.
Finally, Congress has yet to hammer out a compromise over how best to regulate Freddie and Fannie Mae. Both companies face the possibility of being forced to sell off much of their investment holdings if Congress adopts a Senate bill backed by the White House. Freddie Mac officials have been vocal in opposing the proposal, saying it would hurt their ability to fulfill their mission of promoting homeownership.
In April of this year, Freddie Mac reported that it had agreed to pay $410 million to settle outstanding shareholder lawsuits against the company and former officials stemming from its accounting errors. Freddie Mac also agreed to pay a record $3.8 million fine to the Federal Election Commission to settle civil charges that the firm and former executives broke the law by using company resources to raise $1.7 million for political fundraisers.

Chairman and CEO: Richard F. Syron

Chairman and CEO: Richard F. Syron

2007 Financial Data

Total employees: 4,916 | Local employees: 4,526