Fannie Improperly Accounts for Securities, OFHEO Says

NEW YORK -- Fannie Mae, the largest buyer of U.S. mortgages, improperly accounted for some manufactured housing and aircraft lease securities, and must further write down the value of the investments, its federal regulator said Bloomberg News reported Thursday.

“The current accounting of Fannie Mae does not reflect the earnings volatility associated with these assets, does not best reflect actual economic performance and does not recognize on a timely basis impairments of the portfolio,'' Armando Falcon, the director of the Office of Federal Housing Enterprise Oversight (OFHEO), said in a letter to Fannie Mae Chief Executive Franklin Raines.

The letter was posted on OFHEO's Web site. OFHEO asked Washington-based Fannie to complete the writedowns by May 14. The regulator said its examination of other areas of the company's accounting is continuing. KPMG LLP is Fannie Mae's auditor.

Fannie Mae has written down the value securities backed by manufactured and mobile homes by $206 million since 2002, the company said in a regulatory filing in March. It has $8 billion invested in manufactured-housing bonds, of which 24 percent are rated below investment grade, the company said. Its overall portfolio is $881 billion.

-- NYSCPA.org News Staff

Posted on 5/7/04