Troubled home mortgage lender Freddie Mac reported a 60-percent-drop in net income for the first half of 2005, $1.64 billion, partly reflecting losses on derivatives contracts used to hedge interest-rate risks as well as accounting changes.

The company did report that the fair value of its net assets rose 2.2 percent from a year earlier, to $27.4 billion.

Freddie Mac released the results for its first two quarters in a single report, as part of efforts to catch up on its financial reporting, which has been delayed due to an accounting scandal. The company has been behind schedule since early 2003, when it revealed that officials had manipulated accounting practices to smooth earnings. Freddie Mac hopes to resume its normal schedule early next year.

Freddie Mac and Fannie Mae are the two largest buyers of home loans and own or guarantee almost half the $7.6 trillion U.S. mortgage market. The government-chartered companies make their money on the difference between the mortgage returns they buy from lenders and their financing costs. Freddie Mac has said it understated profits from 2000 until 2002 by $5 billion in an attempt to reduce earnings volatility.

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