Fannie Mae Shares Dive on Report of New Problems

WASHINGTON – Shares in Fannie Mae (FNM) plunged Wednesday after a report saying investigators found new accounting violations at the mortgage finance enterprise, which is already under scrutiny for bookkeeping distortions.

A spokeswoman for the Office of Federal Housing Enterprise Oversight (search), which oversees Fannie Mae's financial soundness, would not confirm or deny Wednesday a Dow Jones report that extensive additional problems had been found.

"We have an ongoing examination and I have no comment," said Corinne Russell, a spokeswoman for the Office of Federal Housing Enterprise Oversight.

Fannie Mae (search) shares tumbled following the report, which said investigators discovered evidence executives overvalued assets, underreported credit losses, and misused tax credits. The article cited unnamed sources close to, or who have been involved in, the inquiries.

Fannie Mae stock had been down less than 1 percent before the article was published at about 1320 EDT , but moved quickly lower. Shares closed at $41.71, down 10.7 percent, in their biggest one-day drop since the market crash of October 1987.

The drop wiped out more than $4 billion of the stock's market value.

Fannie shares were exerting the most negative pressure of any stock in the Standard & Poor's 500 index, although the benchmark index remained modestly higher for the day.

Last year, OFHEO accused Fannie Mae of accounting improprieties in the midst of an extensive review of the company's books. Fannie Mae acknowledged accounting problems, ousted top executives and said it would restate earnings.

Officials at the company did not return calls seeking comment.

Fannie Mae is also under investigation by the Securities and Exchange Commission (search), the Departments of Labor and Justice, and by a legal team appointed by the company's board of directors.

SEC officials declined comment. Officials at other agencies could not immediately be reached.