The board of Fannie Mae (FNM) has been discussing a possible executive shake-up as the embattled mortgage giant responds to regulators' allegations of accounting violations and faces a likely restatement of $9 billion or more in earnings.

The board met Sunday to deliberate the issue, but there was no announcement afterward.

Pressure to resign has been building in recent weeks on Franklin Raines (search), chief executive of the government-sponsored company, and its chief financial officer, Timothy Howard. A review by the Securities and Exchange Commission (search) found last week that Fannie Mae must restate earnings back to 2001 because it violated accounting rules for derivatives, financial instruments used to hedge against interest-rate swings, and for some prepaid loans.

A $9 billion restatement, which Fannie Mae previously had said would be likely if the SEC found its accounting was flawed, would wipe out about one-third of reported profit since 2001 at the biggest U.S. buyer and guarantor of home mortgage loans.

Some experts and observers say the company's estimate of the hole in its books is conservative.

Washington-based Fannie Mae did not issue a statement about the special board meeting, which lasted most of the day. Company spokesman Chuck Greener declined comment.

Raines and Howard have certified in sworn written statements the accuracy of Fannie Mae's financial results during the period in question. They would have violated a law — enacted in response to the 2002 corporate scandals and calling for possible prison terms — had they been aware of the accounting improprieties when they signed off.

Certifying the financial statements makes it harder for executives to make the case that they relied on the advice of the company's auditors.

The two executives defended the company's accounting in sworn testimony at a congressional hearing in October. They rejected allegations by the Office of Federal Housing Enterprise Oversight, which oversees Fannie Mae and sibling Freddie Mac (FRE), of accounting improprieties and management misdeeds going back to the late 1990s.

Raines testified that if the SEC also found accounting violations, he would be held accountable by the company's board and shareholders and would take responsibility.

The SEC's investigation continues, and the Justice Department (search) is pursuing a criminal probe into the accounting of Fannie Mae, which is the second-largest U.S. financial institution behind Citigroup Inc. as well as the second-biggest seller of securities after the U.S. Treasury.

Republican lawmakers have renewed calls for tighter government controls on Fannie Mae and Freddie Mac, its smaller rival in the $8 trillion home mortgage market. Legislative action is expected in the new year.

A blistering report by the oversight office, made public in September, cast doubt on Fannie Mae's past earnings reports and even its financial soundness. It raised the possibility of deliberate accounting maneuvers designed to meet earnings targets and thereby bring bigger annual bonuses to top executives.

Howard was singled out in the report for what the regulators said was a failure to provide adequate oversight, a charge he has denied.

To make up the anticipated $9 billion shortfall, Fannie Mae probably would have to sell part of its portfolio of mortgages, raise fresh capital by issuing stock or cut dividends — and its spectacular growth of recent years could be curtailed.

Regulators ordered the company in September to boost its capital cushion against risk by some $5 billion by mid-2005.

Fannie Mae and Freddie Mac pump money into the home mortgage market by buying and guaranteeing repayment of billions of dollars of home loans each year from banks and other lenders, then bundling them into securities that are resold to investors. Their stock and debt are held by investors around the world.