Following an accounting scandal in which the McLean, Virginia-based mortgage purchaser understated its earnings by almost US$5 billion between 2000 and 2002, Freddie Mac, formally known as Federal Home Loan Mortgage Corp., is undergoing a series of wrenching structural changes that are fundamentally altering how the company operates. (On March 22, Martin F. Baumann, Freddie Mac's executive vice president and chief financial officer, resigned after the company had to delay plans for reporting its 2005 financial results until May.)

The accounting scandal is just one of the drivers behind these changes. Freddie Mac is also moving from being a so-called voluntary registrant on the New York Stock Exchange to a full-fledged Securities and Exchange Commission registrant beginning this spring. It must then comply with the Sarbanes-Oxley Act and other regulations.

Moreover, as a growing number of homeowners tap into their home equity, Freddie Mac, like other banks and mortgage providers, is expanding the types of products and services it's offering to customers. With increased competition in the market, Freddie Mac has also heightened its focus on operational efficiency.

"What we're talking about here is a total overhaul" of how Freddie Mac operates, including its IT organization, says Joseph A. Smialowski, the company's executive vice president of operations and technology. To help support the company's need to add new capabilities more quickly and easily, the former Sears, Roebuck and Co. and FleetBoston Financial Corp. CIO is overseeing a major effort to shift IT from its historical approach of building its own software applications to a buy-and-integrate model.

Smialowski, who joined Freddie Mac in December 2004, declined to quantify how much Freddie Mac is investing in its buy-and-integrate program this year. He did say that the amount is in the nine-figure range and represents a portion of the $350 million that the company plans to invest in new IT initiatives in 2006.