Freddie Mac (FRE), the No. 2 U.S. mortgage finance company, Friday said it overstated earnings by $989 million in 2001 and understated profit by more than $5 billion in 2000 and 2002 in order to smooth out results and show the steady growth favored on Wall Street.

Including periods before 2000, the cumulative result of the data manipulation was an understatement of earnings by $5 billion, the company said.

Freddie Mac (search) is also delaying the reporting of its 2003 earnings as a result of prior accounting errors. It said earlier Friday that it expects to release its 2003 results by June 30, 2004.

The disclosure closes one chapter in a scandal involving shady accounting, a doctored diary and ousted executives. The company still faces investigations by regulators and law enforcement officials, and likely tougher government supervision.

"The restatement is a significant step in Freddie Mac's progress toward achieving accurate and timely financial reporting and controls," Shaun O'Malley, chairman of the company's board of directors, said in a statement.

Freddie Mac stunned investors in January when it admitted the accounting ruse, and again in June when it ousted its chief executive and other officers for allowing the accounting irregularities.

The McLean, Va., company warned previously that it had understated earnings by $4.5 billion or more. But until now, it had not provided detailed figures or admitted that profit in any year was exaggerated.

Freddie Mac said that in addition to the overstatement in 2001, it understated profit by $4.33 billion in 2002, by $1.12 billion in 2000, and by $600 million in periods before 2000.

The company said it expects to provide quarterly and full-year 2003 financial results, which are eagerly awaited on Wall Street, by next June.

Despite accounting and corporate governance problems, the company is profitable and solid, Chief Financial Officer Martin Baumann said.

"The restatement did not affect the fundamental strength of Freddie Mac's balance sheet," he said.

Earnings for 2001 were revised downward to $3.158 billion from a previously reported $4.147 billion.

Earnings for 2002 were revised upward to $10.090 billion from $5.764 billion, and profit for 2000 was revised upward to $3.666 billion from $2.547 billion.

Earlier this year, following the company's admission of the accounting sleight-of-hand, an independent report commissioned by the board of directors said senior executives had ignored accounting standards to push forward a flood of earnings to make it easier to meet profit targets in future periods.

The ouster of top executives in June, and the company's delay in giving details of the accounting ruse, launched a push for tighter regulation of Freddie Mac and other mortgage finance companies with government charters, including Freddie Mac's larger sister, Fannie Mae (FNM).

Last month, Fannie Mae (search) 's revision of its third-quarter earnings added urgency to calls for stronger oversight.

While shareholder-owned, Freddie Mac and Fannie Mae are chartered by Congress to help expand homeownership. The companies do not lend directly to home buyers but buy mortgages from lenders and repackage them as securities or hold them in their portfolios.

The two companies, which together carry $1.6 trillion in assets on their balance sheets and have outstanding debt of $1.5 trillion, are not explicitly backed by the U.S. Treasury (search), but many investors believe the government would have to step in and prop them up in a financial crisis.