WASHINGTON – Still more errors have turned up in Fannie Mae's (FNM) government-ordered review of its accounting, the mortgage giant disclosed Tuesday. It also said it doesn't expect the review to be finished before the second half of the year.
The government-sponsored company, which finances one of every five home loans in the United States, said it had found accounting errors in addition to those it disclosed on March 13. Fannie Mae said it will miss a regulatory deadline Wednesday for filing its financial report for the first quarter.
Federal regulators in 2004 accused Fannie Mae of serious accounting problems and earnings manipulation to meet Wall Street targets, and the Securities and Exchange Commission ordered the company to restate earnings back to 2001 — a correction expected to reach an estimated $11 billion. The Justice Department is pursuing a criminal investigation.
The company also has said that it expects an upcoming internal report to show that its financial controls remained insufficient as recently as the end of last year.
"We have substantially completed a comprehensive review of our accounting policies and practices in order to determine whether these policies and practices are consistent" with standard accounting principles, Fannie Mae said in its filing Tuesday with the SEC. "Restating our financial statements is requiring a substantial amount of time and resources because the restatement entails significant complexities."
Washington-based Fannie Mae said the newly disclosed accounting errors involve certain transactions in its business of buying home mortgages from banks and other lenders and bundling them into securities, and the guaranty fees it charges the banks and other lenders. The company said it could not yet determine the effect of the errors on its financial situation.
Similarly, Fannie Mae in March disclosed new accounting problems that had been uncovered in several areas, including certain loans, investment securities, houses acquired through foreclosures, interest on delinquent home loans, and reverse mortgages.
They all are in addition to the accounting-rule violations that came to light in September 2004 involving derivatives, the financial instruments Fannie Mae uses to hedge against swings in interest rates, and its mortgage commitments.