Fannie Mae's regulator disclosed that employees of the government sponsored enterprise falsified signatures on accounting ledgers and made improper changes to earnings-related database records, the Wall Street Journal reported.
Instances of these actions were found by Investigators of the Office of Federal Housing Enterprise Oversight, an official of the regulator reportedly told the Journal.
The investigators are seeking additional documents from Fannie to determine whether the employees intended to manipulate financial statements, the official reportedly said.
A Fannie spokesman declined to comment on the official's statements.
OFHEOs disclosure of the findings follows an agreement last week with the government sponsored housing enterprise's board of directors. Among the requirements of the pact was that Fannie would prohibit the falsification of signatures on accounting ledger journal entries, adopt internal controls that would limit the ability of personnel to overwrite database records, and provide proper documentation, according to a March 8 announcement. At that time, the two parties would not say whether the agreement was a response to specific incidents, the Journal said.
The regulator's director met with Fannie's chairman Wednesday to discuss the regulator's efforts to obtain certain documents related to the year-old investigation OFHEO has carried out on the company's accounting and corporate governance. While Fannie's board has generally been "very responsive" to OFHEO requests, it has withheld portions of many requested documents citing legal concerns as the reason, the official reportedly told the Journal.
OFHEO began its investigation on Fannie after the GSE restated $1.1 billion of its stockholder equity in November 2003 for miscalculating mortgage commitments. A series of events have unfolded since then, including OFHEO classifying the Washington, D.C.-based company as "significantly undercapitalized," and the resignations of former chairman and chief executive Franklin D. Raines and former chief financial officer J. Timothy Howard.
Fannie announced yesterday that it filed a Form 12b-25 with the SEC indicating "it will not timely file its Annual Report on Form 10-K for the year ended December 31, 2004." The company indicated in the filing an additional $2.4 billion in earnings adjustments may be required.
Fannie Ads Slashed, More Accounting Woes
Fannie Mae's regulator has found more accounting practices that are not consistent with generally accepted accounting principles. And an approved recapitalization plan slashes spending on advertising and lobbying.
Big Shake Up at Fannie
Caught up in a whirlwind of controversy, two of Fannie Mae's top executives have exited, and regulators now say the mortgage giant is significantly undercapitalized.
Fannie Discloses Criminal Inquiry
Fannie Mae has reported in an SEC filing that it is under a criminal investigation and that it is the defendant in a plethora of shareholder lawsuits.