updated 8/30/2007 8:14:37 AM ET 2007-08-30T12:14:37

Freddie Mac, the second-largest U.S. buyer and guarantor of home mortgages, said Thursday its second-quarter profit fell 45 percent as it had to record larger provisions on its books for bad loans.

The government-sponsored company, which is returning to normalcy after an accounting scandal four years ago, said it earned $764 million, or $1.02 per share for the three months ended June 30. That contrasted with profit of $1.4 billion, or $1.93 a share, a year ago.

Revenue rose 4.8 percent to $2.26 billion from $2.15 billion in the quarter a year ago. Freddie Mac makes money from interest payments on mortgages it holds on its books, and fees from insuring mortgages sold to investors.

The company said it recorded a $320 million provision for credit losses in the second quarter due to problems with loans originated this year and last year, amid a deepening mortgage crisis nationwide that has bankrupted more than 50 lenders.

The earnings results missed Wall Street expectations, with analysts surveyed by Thomson Financial expecting a profit of $1.16 per share on revenue of $1.69 billion.

Freddie Mac, and its larger government-sponsored sibling Fannie Mae, were created by Congress to pump money into the $8 trillion home-mortgage market by buying home loans from banks and other lenders and bundling them into securities for sale on Wall Street.

Copyright 2007 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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