WASHINGTON – Franklin Raines (search), who was forced out as Fannie Mae's (search) chief executive after five years, is due to receive a pension of $1.3 million a year for life, according to an agreement with the mortgage lending giant.
In documents filed Monday with the Securities and Exchange Commission (search), Fannie Mae also revealed that Raines has deferred compensation of $8.7 million to be paid out through 2020 and owns more than $5.5 million in the company's stock.
But the deal is not done. Federal regulators have asked Fannie Mae to hold off paying any compensation to Raines until they have time to investigate the package and whether it was appropriate for the federally chartered lender to let Raines retire early rather than be dismissed.
Another point of contention is Raines' retirement date. According to the filing, "Mr. Raines has asserted" to Fannie Mae that his retirement is effective June 22, which would enable him to receive an additional $600,000 in salary. That scenario also would add more than $100,000 to Raines' monthly pension payment of $114,393. In the filing, Fannie Mae did not agree to those terms.
Without the disputed amounts, Raines is slated to take home more than $1.3 million annually, plus benefits such as life and health insurance.
Raines was forced out Dec. 21 by Fannie Mae's board of directors, along with Chief Financial Officer Timothy Howard.
The Office of Federal Housing Enterprise Oversight (search), or OFHEO — the company's chief regulator — pressured the board to act after the SEC said the company must make accounting corrections that could erase $9 billion of past profit dating to 2001.
On an interim basis, Raines is being replaced by Daniel H. Mudd, currently the company's chief operating officer. Robert J. Levin will serve as interim chief financial officer as Fannie Mae works with an outside search firm to find permanent replacements.
According to the filing Monday, Howard will be paid $84,000 in salary through Jan. 31 and receive a monthly pension of $36,071 for the rest of his life. He has more than 480,000 shares in stock options, ranging in value from about $27 to about $81 a share, and deferred compensation of $4 million.
The restatement of possibly $9 billion of past profits could force the company to take a variety of actions to deal with what OFHEO said last week was a "significantly undercapitalized" balance sheet, meaning the regulators believe the company lacks the money to cover potential losses.
Fannie Mae and smaller rival Freddie Mac pump money into the home mortgage market. The firms buy and guarantee repayment of billions of dollars of home loans each year from banks and other lenders, then bundle them into securities that are resold to investors. Their stock and debt are held by investors around the world.