Freddie Mac results boosted by accounting tweak

The Federal Home Loan Mortgage Corporation company achieved
better-than-expected results after tweaking its accounting practices.

One of the main differences involved adjustments to how the US company,
commonly known as Freddie Mac accounts for the financial instruments used to
hedge against swings in interest rates.

Under the revised measures, the company said it lost more than $1.3bn
(£0.67bn) on derivatives in the first quarter, compared with a loss of nearly
$2.3bn in the fourth quarter of 2007,
reported. Its net loss for the first quarter was $151m.

‘If you change the accounting rules, things can look better,’ said R
Christopher Whalen, managing director of consulting firm Institutional Risk

Freddie Mac is a US government-sponsored enterprise, which was created in
1970 to expand the secondary market for mortgages. It buys mortgages on the
secondary market, pools them, and sells them on as mortgage-backed securities to
investors on the open market.

Citigroup analyst Bradley Ball cited ‘improved accounting methodologies’ as a
reason for Freddie’s positive results.

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