Fannie Mae Ordered to Revamp Accounting

WASHINGTON -- Federal regulators on Thursday ordered Fannie Mae to promptly revamp its accounting to more closely reflect losses on some investments, saying the mortgage giant's accounting has violated standard principles in some instances, The Associated Press reported.

The sharp action by the Office of Federal Housing Enterprise Oversight (OFHEO) may force the government-sponsored company to restate its earnings. It capped a period of intensifying scrutiny by regulators of Fannie Mae, following an accounting scandal that erupted at smaller rival Freddie Mac last spring.

"Fannie Mae improperly accounted for these assets in a way that fails to reflect losses," OFHEO Director Armando Falcon wrote in a letter to Franklin Raines, Fannie Mae's chairman and chief executive. "... We will take the necessary steps to correct this."

Fannie Mae, the second-largest U.S. financial institution behind Citigroup, was given until May 14 to recalculate the losses in investments in mobile homes and aircraft leases and to revamp its financial statements accordingly.

-- NYSCPA.org News Staff

Posted on 5/7/04