Mortgage Daily

Published On: November 10, 2005
New Fannie CFO, $10 Billion Error Announced

Accounting principles misapplied

November 10, 2005


The misapplication of accounting principals at Fannie Mae may wind up reducing last year’s earnings by more than $10 billion.

In a Form 12b-25 late filing notification with the Securities and Exchange Commission, the Washington, D.C.-based secondary lender said it misapplied hedge accounting under Financial Accounting Standard No. 133, Accounting for Derivative Instruments and Hedging Activities, for some of its derivatives and expects to record an estimated net cumulative after-tax loss of approximately $8.4 billion as of Dec. 31, 2004.

Fannie also estimated another $2.4 billion in after-tax losses last year from the misapplication of Financial Accounting Standard No. 149, Amendments of Statement 133 on Derivative Instruments and Hedging Activities, noting it misapplied cash flow hedge accounting criteria for its mortgage commitments. The government sponsored housing enterprise estimates “the net cumulative amount of after-tax losses relating to mortgage commitments deferred in accumulated other comprehensive income…was approximately $2.4 billion as of Dec. 31, 2004.”

The filing came as the company announced a new chief financial officer, Robert T. Blakely, as well as a new chief business officer, chief operating officer and a host of other executive appointments.

Blakely reportedly “oversaw the restatement and restructuring of the finance, accounting and controls functions” at MCI, formerly known as WorldCom — infamous for being the company with the biggest accounting fraud in U.S. history. He has more than 30 years experience in finance, accounting, controls, and management, Fannie said, and was CFO of Tenneco and of Lyondell Chemical.

“Last June, I said our priorities were to…get to the bottom of our accounting issues as we work through the restatement and reaudit,” said Fannie CEO Daniel Mudd in an announcement. “As we continue to make changes and progress, including the achievement of our 30 percent capital requirement, we fully recognize that we have much more to do.”

Sam Garcia has been in mortgage lending since 1980, and is publisher of,, and


GSE News | Fannie/Freddie Share Statistics
Fannie, Freddie and FHLB news. Coverage of government sponsored enterprise regulation, operations and litigation.


Tools for Your Next Big Decision.

Amortization Calculator

Affordability Calculator

Mortgage Calculator

Refinance Calculator

FHA Mortgage Calculator

VA Mortgage Calculator

Real Estate Calculator


Pre-Approval Resources!

Making well educated decions in a matter of minutes and stay up to date on the latest news Mortgage Daily has to offer. Read our latest articles to stay up to date on what’s going on…

Resource Center

Since 1998, Mortgage Daily has helped millions of people such as yourself navigate the complicated hurdles of the mortgage industry. See our popular topics below, search our website. With over 300,000 articles, we are guaranteed to have something for you.

Your mortgages approval starts here.

Add 1-2 sentence here. Add 1-2 sentence here. Add 1-2 sentence here. Add 1-2 sentence here. Add 1-2 sentence here.

Stay Up To Days with Today’s Latest Rates


Today’s rates starting at


5/1 ARM
$200,000 LOAN

Home Refinance

Today’s rates starting at


$200,000 LOAN

Home Equity

Today’s rates starting at


$200,000 LOAN


Today’s rates starting at


$200,000 LOAN