Overview of the Corporation

Freddie Mac, also known as, Federal Loan Mortgage Corporation started in the year 1970. The main aim of founding the corporation was to find the equality between the State’s mortgage markets and spread the chances for domestic possession.  The company started with 18 members and 13 selected partners where the United States President chose five of them. The company has a unique connection with the administration scheme.  The main function of the Company is to buy home mortgages from the American government and later sells them to investors.  The company buys mortgages from mortgage lenders including the National banks and other financial organizations, repackage them as debt securities and later bought by investors.  It earns income from the cost deduction of the money that the government spends and from the money gained from selling to the investors.  Therefore, the Company is a secondary market that conducts business between mortgage lenders and investors (Khan, 2004). 

Reviewing the financial declaration and finding the existing curvatures are the processes of studying the accounting indecency. The Freddie Mac Company revealed their increasing income of 2000-2002 that were higher than their original earnings.  The Company’s problems seemed different from other companies since their case were not of prowling of the company by its managers.  The company breaks laws and does not have business ethics, which diminishes the honesty of the Company (Khan, 2004). 

The company gives false description of their incomes.  This is because they had earlier lost their status with future shareholders and creditors. They also provided their managers with motives so that they engaged with insider trading.  The company thought that the business unit has lower income and could lessen their stock price and the bond price.  The Company executives are aware of the fraud, know that the earnings flow is higher, and can get profit through conducting fraud. This is how the company conducted fraud to earn income (Khan, 2004).      

Reference

Khan, M. (2004). The Scandal in Home Mortgage Financing.

 Retrieved May 4, 2017, from http://www.corp-research.org/e-letter/scandal-home-mortgage-financing