Standard & Poor's Governance Services has lowered its corporate governance score on Fannie Mae from CGS-9 to CGS-7 following meetings with the company's management and directors.The score was also removed from GovernanceWatch, where it was listed with negative implications. (The top score is CGS-10.) S&P said the score was lowered for three main reasons: recent determinations by the Securities and Exchange Commission regarding Fannie Mae's accounting policies; late regulatory filings; and concerns about board oversight of finances and of management's regulatory relations. "The SEC's determination suggests governance shortcomings with regard to the quality of public disclosure and the ability of the Audit Committee to monitor adequately the company's accounting policies," said S&P's governance analyst Dan Konigsburg. He also cited "sharpened concerns" about how Fannie's board has monitored relations with its regulator, the Office of Housing Enterprise Oversight. "Given the unique structure of Fannie Mae as a GSE, its public mission, and its distinctive regulatory arrangement, board oversight of regulatory relationships is an important gauge of overall board effectiveness," Mr. Konigsburg said. On a favorable note, the response to the controversies by Fannie's independent directors, especially the independent Review Committee, has been "notably strong," he said.

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