Fannie Mae has notified the government it will miss quarterly 10Q filing deadline.
In a FORM 12b-25 filing with the Securities and Exchange Commission Wednesday, the Federal National Mortgage Association, known as Fannie Mae, said it is "unable to provide a reasonable estimate of either its first quarter 2005 results of operations or its restated first quarter 2004 results of operations. Accordingly, Fannie Mae cannot at this time estimate what significant changes will be reflected in its first quarter 2005 results of operations from its restated first quarter 2004 results of operations."
While the Washington, D.C.-based company previously estimated a loss of hedge accounting under FAS 133 for its derivatives that will result in a $9 billion restatement, Fannie has lowered the estimated after tax loss to $8.4 billion.
The SEC determined that the government sponsored enterprise's "accounting practices did not comply in material respects with the accounting requirements of FAS 133 and FAS 91," the filing said. "The company expects that the impact of the misapplication of FAS 133 will be material to Fannie Mae's results for many, if not all, periods and will vary substantially from period to period based on the amount and types of derivatives held and fluctuations in interest rates and volatility."
Fannie's regulator, the Office of Federal Housing Enterprise Oversight, told the secondary lender's board in February about a possible misapplication of FAS 149, according to the filing. "The company estimates that it would be required to record in earnings a net cumulative after-tax loss related to these commitments of approximately $2.4 billion as of December 31, 2004."
Errors in applying FAS 115, Accounting for Certain Investments in Debt and Equity Securities, will result in reclassification but "will have no impact on earnings," the company disclosed.
Fannie said it expects to see a "sustained high proportion of mortgage originations comprising adjustable rate products" as a result of rapid home price appreciation, and noted a substantial rise in recent Alt-A, subprime and investor originations.