Freddie Cuts Income, Citing Computer Snafu

Freddie Mac has reduced its profits for the first half of 2005 by $220 million, lowering reported net income to $1.4 billion from the $1.6 billion previously reported in the company's Aug. 31 financial release.Freddie Mac said the mistake, stemming from miscalculations since 2001 in a legacy computer system, caused interest income on certain mortgage securities to be accrued too early. The government-sponsored enterprise said management found and corrected the error in the course of internal control enhancements. Freddie Mac noted that the amount of the income reduction represents less than 1% of its $36.1 billion of reported regulatory core capital. Martin Baumann, Freddie Mac's chief financial officer, said Freddie continues to make progress in fixing its financial problems. "When we found this error, we corrected it immediately," he said. "We are continuing to move forward to complete the job of producing timely, accurate financial reports early in 2006." Freddie Mac can be found online at http://www.freddiemac.com.