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Top Fannie, Freddie regulator to resign

Armando Falcon, director of the federal regulator of mortgage finance giants Fannie Mae and Freddie Mac, resigned Tuesday, saying the most critical issues facing the agency had been addressed.
/ Source: Reuters

Armando Falcon, director of the federal regulator of mortgage finance giants Fannie Mae and Freddie Mac, resigned Tuesday, saying the most critical issues facing the agency had been addressed.

According to a letter Falcon sent the president, Falcon will leave the Office of Federal Housing Enterprise Oversight on May 20, "absent extraordinary circumstances."

Falcon's letter comes as lawmakers begin to consider legislation that would create a new regulator with more authority than OFHEO.

The agency was criticized by some lawmakers for failing to prevent Freddie Mac's accounting problems, which led to a $5 billion earnings restatement. But the regulator was first to identify accounting problems at Fannie Mae last year — issues that continue to unfold and may lead to a profit restatement of more than $11 billion.

"The agency has successfully dealt with serious problems at two of the largest financial institutions in the world," Falcon wrote. "And we did so in a manner that avoided disruption in our financial system, while allowing both companies to continue fulfilling their vital public mission."

Fannie and Freddie are shareholder-owned companies charged by Congress with boosting homeownership by ensuring a liquid mortgage market.

Accounting problems first surfaced at Freddie Mac, leading to a $5 billion earnings restatement in 2003. The company, under new leadership, is expected to begin reporting regular financial results again later this year, a big step in moving beyond its accounting scandal.

Problems at Fannie Mae began to unfold last year, and investigations of its accounting practices are underway by OFHEO and other agencies.

Under legislation due for consideration on Capitol Hill, OFHEO would be succeeded by a new, independent regulatory agency.

One bill offered on Tuesday would give that new regulator greater powers than OFHEO had over the companies' business.