Fannie Mae Directors Agree To Correct Accounting Treatments, Raise Capital Surplus As Required By OFHEO
|September 27, 2004
WASHINGTON, D.C. — Armando Falcon, Jr., Director of the Office of Federal Housing Enterprise Oversight (OFHEO), has announced an agreement with the Fannie Mae Board of Directors requiring immediate action to address the improper accounting and inadequate controls detailed in OFHEO’s findings to date of its special examination.
The agreement requires Fannie Mae to:
- Implement correct accounting treatments that will bring the Enterprise into compliance with SFAS 91 and SFAS 133 accounting standards.
- Protect the existing capital surplus and move to a targeted capital surplus equal to 30% of their required minimum capital.
- Undertake a top-to-bottom review of staff structure, responsibilities, independence of functions, compensation and incentives.
- Appoint an independent chief risk officer and separate other key business functions currently performed jointly by certain individuals or departments.
- Put in place policies to assure adherence to accounting rules and new internal controls.
“The serious concerns raised in OFHEO’s report require prompt action,” said OFHEO Director Falcon. “This agreement is an important step toward resolving these concerns and helping to assure safe and sound operations at the Enterprise. I want to commend the Board of Fannie Mae for moving quickly to address a complex set of issues,” Falcon said.
The agreement provides specific steps and timetables. Other matters, raised by OFHEO’s examination, including management accountability, remain under active review.