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Regulator: Fannie Mae accounting flawed

Fannie Mae's regulator has found differences between the U.S. mortgage finance company's accounting practices and generally accepted bookkeeping procedures, a congressional source said Monday.
/ Source: Reuters

Fannie Mae's regulator has found differences between the U.S. mortgage finance company's accounting practices and generally accepted bookkeeping procedures, a congressional source said Monday.

The regulator, the Office of Federal Housing Enterprise Oversight, is due to present its findings to the company's board of directors Monday, several sources said.

"Our understanding is that OFHEO's exam, while it's not completed, has found discrepancies with GAAP (generally accepted accounting principles) and insufficient internal controls," the congressional source said.

OFHEO and Fannie Mae officials declined to comment.

"We have not received the OFHEO report and we're not commenting," said Janice Daue, a Fannie Mae spokeswoman.

OFHEO's findings would be the result of an eight-month investigation into the company's accounting prompted by a bookkeeping problems last year at sister mortgage finance company Freddie Mac.

Louisiana Republican Rep. Richard Baker, who has held numerous hearings to examine the risks and growth of both companies, told the Wall Street Journal that investigators had discovered at Fannie Mae the same practices regulators say Freddie Mac used to smooth volatile earnings and present steady profit growth.

Baker's office did not return calls seeking comment.

Freddie Mac paid a $125 million fine to the government for its accounting problems and replaced five senior executives.