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Freddy Mac Fraud

574 Words3 Pages

In 1970 Congress handed Freddie Mac, whom corporate headquarters is located in McLean, VA., a mission to reestablish the nation’s residential mortgage market and increase the opportunities for all homeownership and make it affordable for rental housing. According to the Freddie Mac Company’s website stated that “They embarked their own mission to provide liquidity, constancy and affordability to the U.S. housing market. They also took part in a secondary mortgage market with purchasing mortgage loans and mortgage related securities for investments and to issue guaranteed mortgage related securities.” This market consist of institutions engaged in buying and selling mortgages in the form of whole loans. Freddie Mac does not loan money directly to homeowners. Freddie Mac is a government Sponsored Enterprise which means this company has a different relationship with the government. This company is composed of 18 members, 13 whom are elected by shareholders and 5 whom are appointed by the President of the United States. They …show more content…

When their irregularities were first found the company declared that its errors were different from those of other corporate America accounting wrongdoings. Instead of increasing the company’s earnings, Freddie Mac has understated its profits. (Khan, 2004). Glater stated in the “Market Place: Freddie Mac Gets Penalty...” article, the financial statements, from November 2003, disclosed earnings for the years of 2000-2002 were stated higher than what it had first reported in the beginning. Freddie Mac had then inflated its earnings for 2001 by almost $1 Billion. (Glater, 2003) Khan stated that according to Standard’s & Poor’s, “news of the one year of inflated earnings adversely changes the character of the accounting controversy because it reflects an even more volatile true earnings

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