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Freddie Mac Fined $125M for Transgressions

MCLEAN, VA-Freddie Mac tries to put its internal accounting problems in the past and commits to paying a $125 million penalty under a consent order charging the housing mortgage financier with misstating earnings.

By Barbra Murray | Updated on December 11, 2003

MCLEAN, VA-Freddie Mac has made a move to close the book on a massive financial mishap before year’s end. The home and multifamily housing lender has signed off on a consent order with the Office of Federal Housing Enterprise Oversight that requires it to pay a $125 million fine related to misstated earnings totaling $4.4 billion for the years 2000 through 2002. Freddie Mac’s settlement with OFHEO stems from the corporation’s financial transgressions–the existences of deliberately faulty accounting procedures instituted by certain former members of management–that were revealed over the summer following internal and external investigations.

In the letter documenting the cease and desist proceedings against Freddie Mac, OFHEO director Armando Falcon Jr. concluded that, “Freddie Mac engaged in conduct that does not conform with the Federal Housing Enterprises Financial Safety and Soundness Act of 1992, OFHEO rules, guidances and standards, and the Federal Home Loan Mortgage Corp. Act, and that such conduct has resulted in harm to Freddie Mac.” For its part, in agreeing to the issuance of the order, Freddie Mac declined to admit or deny any wrongdoing specified in the order.

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