Freddie Mac Agrees to $125 Million Settlement
Freddie Mac's board agreed to the consent decree in a conference call last night.
The $125 million fine is the first that OFHEO has imposed in its 10-year history.
Freddie Mac officials had initially suggested a penalty of $50 million, sources said, while OFHEO officials suggested a figure three to four times that amount.
While Freddie Mac officials believe a $50 million fine would be in line with similar penalties for other large financial institutions, sources say that OFHEO Director Armando Falcon Jr. pushed a larger penalty.
OFHEO's inquiry has been underway since Freddie first acknowledged accounting problems in January. The regulator's inquiry intensified in June, when Freddie Mac ousted its chairman and chief executive, Leland C. Brendsel, and two other top executives in connection with accounting errors.
In June, the board named Gregory J. Parseghian as Brendsel's replacement, but in August, under pressure from the OFHEO, Parseghian said he would step down as soon as a replacement was found. This week Freddie Mac announced that Syron will become the new chairman and chief executive at the end of the year.
A settlement with the OFHEO still leaves open a probe by the Securities and Exchange Commission, which company officials hope will be settled in February or March, and a more narrow probe of possible criminal conduct by the Justice Department.
OFHEO is now turning to a close examination of rival mortgage company Fannie Mae.
Fannie Mae and Freddie Mac are among the nation's largest and most complex financial institutions, with combined assets of more than $1.6 trillion.
Freddie Mac provides funding for home mortgages by buying loans from lenders and then either holding them or repackaging them as securities for sale to investors. Though chartered by Congress, Freddie Mac is a publicly traded, shareholder-owned company.
© 2003 The Washington Post Company