Fannie Mae hits its marks
|November 7, 2005|
Mortgage giant boosts reserve cushion
Fannie Mae has achieved a major government-imposed requirement, boosting its reserve cushion against risk, its regulating agency said last week.
The mortgage giant brought its reserve cushion up to 30 percent surplus capital, the Office of Federal Housing Enterprise said.
OFHEO ordered Fannie Mae to increase its capital reserve after an accounting scandal last year at the government-sponsored company, which is the biggest buyer of home mortgages in the United States.
In December 2004, Fannie Mae replaced Franklin Raines, its chairman and CEO, who announced he was taking early retirement, and Fannie Mae's chief financial officer, Timothy Howard, resigned Dec. 21.
Fannie Mae's financial accounting troubles have drawn shareholder lawsuits and investigations by the Justice Department and the Securities and Exchange Commission.
The company has since restated several past years' earnings amounting to approximately $5 billion. OFHEO fined the company $125 million.
The oversight office said last week that Fannie Mae had an estimated $9.1 billion capital surplus as of Sept. 30 – giving it an additional $752 million over the required 30 percent surplus.
In recent months, the company has been raising fresh capital by selling off chunks of its portfolio of mortgage investments.
"Based on current information, this surplus is sufficient to absorb uncertainties in the estimated impact to capital of potential additional accounting errors, which may arise during the restatement process," Stephen Blumenthal, acting director of OFHEO, said in a statement last week.
Copyright 2005 Inman News