Fannie Mae has signed a supplemental supervisory agreement with its regulator, promising not to employ in any capacity its former chairman/chief executive Franklin Raines, while addressing a host of concerns on accounting systems and corporate governance issues.The agreement, signed by Stephen Ashley, the government-sponsored enterprise's non-executive chairman, comes two weeks after Fannie Mae said the Office of Federal Housing Enterprise Oversight had raised new concerns about its accounting systems. The supplemental agreement -- disclosed on Tuesday -- addresses issues of internal controls, including Fannie's adoption of policies that prohibit the falsification of signatures on accounting ledger journal entries. OFHEO Director Armando Falcon Jr. said the agreement corrects "problems of the past" and safeguards against "problems emerging in the future." The agreement also requires Fannie to automate how it marks to market its MBS portfolio. The GSE will also formally separate its CEO and chairman functions. Not only has Fannie agreed to a prohibition on engaging the services of Mr. Raines, but it also cannot hire former chief financial officer Timothy Howard in any capacity. Under pressure from OFHEO, Messrs. Raines and Howard were ousted right before Christmas.

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