The Office of Federal Housing Enterprise Oversight has finalized a corporate governance rule that requires Fannie Mae and Freddie Mac to meet Sarbanes-Oxley Act standards even while they are not registered with the Securities and Exchange Commission.The rule requires the chief executives and chief financial officers of the two giant mortgage companies to certify their financial reports. In the case of a restatement, the chief executive officer and chief financial officer could lose their bonus and other incentive pay, including profits from the sale of stock. Fannie is registered with the SEC, but it has stopped filing quarterly reports because of an accounting scandal. Freddie Mac is in the process of restating its earnings and plans to register with the SEC next year. The final rule, which goes into effect 60 days after being published in the Federal Register, also establishes compensation guidelines for the two government-sponsored enterprises, limits directors' terms to 10 years, and requires the board of directors to meet at least eight times a year. GSE risk management and compliance officers are required to report directly to the CEO and provide reports to the board of directors. "This regulation is part of our continuing effort to ensure that Fannie Mae and Freddie Mac are held to the highest standards of business and corporate governance," OFHEO Director Armando Falcon said.

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