OFHEO OKs Fannie's Plan, but Finds New Woes

Fannie Mae's regulator has approved the capital restoration plan of the troubled government-sponsored enterprise but has also found some previously undisclosed problems with its accounting systems and internal controls.According to a statement released by Fannie, the Office of Federal Housing Enterprise Oversight has identified additional "issues" it has with the company, including the way it classifies its holdings of mortgage-backed securities under FAS 115. OFHEO has also questioned the way it accounts for "dollar roll repurchase agreements" under which Fannie sells MBS, agreeing to repurchase similar securities at a later date. But despite these concerns, OFHEO has approved the company's capital plan, first submitted last September. Under the plan Fannie aims to achieve a 30% capital surplus by Sept. 30. OFHEO originally had wanted the company to meet the 30% goal by June 30, but it is giving Fannie an additional 90 days. In December OFHEO declared Fannie significantly undercapitalized, which led to the ouster of its chairman and chief executive officer, Franklin Raines, and its chief financial officer, Tim Howard.