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Fannie Mae Focuses on Reform

WASHINGTON, DC-Fannie Mae agrees to pay $400 million in a $11-billion accounting scandal. Also as part of the agreement, the company will undertake a comprehensive reform program.

By Erika Morphy | Updated on May 23, 2006

(To read more on the debt and equity markets and the multifamily market, click here.)

WASHINGTON, DC-Yesterday marked the high water mark in the ongoing $11-billion accounting scandal at Fannie Mae. At the start of the day, Fannie Mae’s board of directors released the findings from Paul, Weiss’ investigation on its accounting, governance, structure and internal controls. That afternoon it announced it would pay a $400-million fine for accounting violations, many of which were highlighted in the report.

The settlement was announced jointly by the Securities and Exchange Commission and the Office of Federal Housing Enterprise Oversight 2004. “The penalty and settlements represent a major step in correcting a dangerous course that had been followed by one of the largest financial institutions in the world,” said acting OFHEO director James Lockhart. “Unprincipled corporate behavior and inadequate controls will simply not be tolerated.”

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