Feds said to subpoena Fannie Mae

August 20, 2004

NEW YORK (Reuters) - Fannie Mae was subpoenaed by its U.S. regulator as part of an examination of the largest U.S. mortgage financier's accounting practices, according to a published report.

The Wall Street Journal reported Friday that the subpoenas come amid signs that the regulator, the Office of Federal Housing Enterprise Oversight, wants to report its findings in the next month or so, earlier than expected. The newspaper did not say what specific information is being sought.

Fannie Mae, based in Washington, did not immediately return a call seeking comment. It declined to comment to the newspaper.

Any new finding of flaws might strengthen the hand of politicians hoping to more tightly regulate Fannie Mae and smaller rival Freddie Mac.

It might also add to pressure on Fannie Mae executives, whose compensation has been questioned by some members of the Congress, the newspaper said. CEO Franklin Raines received about $20 million last year, it said.

Last month, OFHEO's director, Armando Falcon, said Fannie Mae missed some deadlines in submitting responses to the regulator's information requests.

"We're making progress, but we could be doing better if we had complete submissions and more timely availability of employees," he said.

OFHEO began regulating Fannie Mae this year after Freddie Mac admitted that executives manipulated earnings to smooth out fluctuations and produce steady results. The accounting scandal resulted in a $5 billion earnings restatement.

OFHEO's examination of Fannie Mae's books has required the company to change how it accounts for some investments that had lost value. The regulator has warned the review might ultimately require Fannie Mae to restate earnings.

Fannie Mae and Freddie Mac buy loans from lenders and repackage them as securities, or hold them in their own portfolios. They do not lend directly to home buyers.

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