WASHINGTON – Mortgage giant Fannie Mae (search) announced Friday it was withholding millions of dollars in bonuses from its top executives as it continued to come to grips with revelations of serious financial reporting problems.
The nation's biggest backer of home mortgages announced in a filing to the Securities and Exchange Commission (search) that its board of directors had voted to eliminate cash bonuses that would have been paid for the performance of top executives in 2004. The company said it was also postponing the payment of any stock awards for last year.
This action will affect 43 top officials who will lose millions of dollars in scheduled performance bonuses.
The company also said in the filing that Fannie Mae controller Leanne Spencer (search), the company's top accounting officer, had "stepped down" earlier this week to take a lesser role as special adviser to Michael Williams, the president of the company's Internet business.
Fannie Mae's chief executive, Franklin Raines (search), and its top financial officer, Timothy Howard, were forced out last month after revelations that the company will have to restate some $9 billion in earnings, or about one-third of its profits, dating to 2001.
To begin making up that shortfall and increase the company's capital reserves, Fannie Mae announced on Tuesday that it was cutting its first-quarter dividend payment by half, to 26 cents per share.
The company is also expected to sell off part of its portfolio of mortgages and raise fresh capital by issuing stock.
Regulators in the Office of Federal Housing Enterprise Oversight ordered the company in September to boost its capital cushion, the amount of reserves it has to guard against financial losses, by some $5 billion by the middle of 2005.
Stefanie Mullin, a spokeswoman for the oversight office, said the regulator had been informed of the board's action regarding bonuses and "we consider the action reasonable and appropriate."
Fannie Mae also confirmed Friday that it its board had voted to withdraw from a deal to develop a new office complex that had been expected to cost $500 million to $700 million and spur development in a rundown section of Washington. Fannie Mae had signed a letter of intent regarding the project last April.
"The board did vote to withdraw the nonbinding letter of intent that we had entered into," Fannie Mae spokeswoman Janis Smith said. "The company made the decision to cut costs as we work towards rebuilding capital."
In its new SEC filing on Friday, Fannie Mae did not disclose the total amount in cash bonuses that were being eliminated, and Smith also refused to give a figure other than to indicate it would be in the millions of dollars and would affect the company's 43 top executives.
In 2003, the top five officers at Fannie Mae alone received $8.2 million in cash bonuses.
The action by the board will mean that Raines and Howard will be denied cash bonuses they would have received for 2004. The board had come under heavy criticism in recent weeks for allowing both men to leave the company with lucrative severance packages.
In another action disclosed on Friday, the Fannie Mae board voted to eliminate the requirement that the company's chief executive officer, the position formerly held by Raines, also serve as chairman of the company's board.