Fannie Mae (FNM)

[HenryTo]

Fannie Mae looks to be getting cheap here from a traditional valuation standpoint. However, there are definitely many uncertainties surrounding the company, such as its upcoming earnings restatement, the flattening of the yield curve, and the continued calls for reining in its portfolio.

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[HenryTo]

Hmmm... the scandals from FNM just keep on coming?
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Fannie Mae workers faked signatures-regulator
Thu Mar 17, 2005 09:29 AM ET

(Recasts with confirmation from Fannie Mae's regulator)
WASHINGTON, March 17 (Reuters) - U.S. investigators have found instances of Fannie Mae (FNM.N: Quote, Profile, Research) employees falsifying signatures on accounting ledgers and making changes in earnings-related records without following proper procedures, a regulatory official said on Thursday.

"We have found instances of falsifying signatures on accounting ledgers and making changes to database records," an official from the Office of Federal Housing Enterprise Oversight, Fannie Mae's regulator, said on condition of anonymity.

The investigation is on-going, and the Securities and Exchange Commission is also conducting a probe.

Fannie Mae faces a multibillion-dollar earnings restatement after accounting problems surfaced last year that led to the ousting of top executives and a probe by federal regulators.

Shares of Fannie Mae closed Wednesday at $56.95 on the New York Stock Exchange.

[HenryTo]

This is a step in the right direction, IMHO:
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Fannie Mae Changes Bonus Pay System
Friday March 11, 8:05 pm ET
Hitting Wall Street's Profit Targets No Longer Sole Gauge for Fannie Mae Bonuses

WASHINGTON (AP) -- Hitting Wall Street's profit targets will no longer be the sole gauge for awarding bonuses to executives at Fannie Mae, in changes to its pay system made by the embattled mortgage giant that were disclosed Friday.
Federal regulators who found serious accounting problems last year at the biggest U.S. buyer of home mortgages also raised the possibility of deliberate accounting maneuvers designed to meet earnings targets and thereby bring bigger annual bonuses to top executives.

Fannie Mae is facing a restatement of earnings back to 2001, as ordered by the Securities and Exchange Commission, a correction that could reach $9 billion or more.

In a filing Friday with the SEC, Fannie Mae said its board had revised the gauges for awarding bonuses to also include achieving the government-sponsored company's mission of making housing affordable for low-income and minority people, making progress in the restatement project and improving the corporate culture.

The changes were approved by the Office of Federal Housing Enterprise Oversight, the agency that supervises Fannie Mae and has been investigating its accounting, the company said in its filing.

It also disclosed an increase in the base salary of Daniel Mudd, the interim chief executive who replaced ousted chairman and CEO Franklin Raines in December, from $746,000 to $850,000. The salary boost reflected increased responsibilities for Mudd, who had been chief operating officer, the company said.

Washington-based Fannie Mae recently stopped awarding stock options to senior managers.

Fannie Mae and Freddie Mac, its smaller rival in the $8 trillion home-mortgage market, were created by Congress to pump money into the home-mortgage market. They buy and guarantee repayment of billions of dollars of home loans each year from banks and other lenders, then bundle them into securities that are resold to investors worldwide.

[HenryTo]

From marketwatch.com:

Fannie Mae agrees to more reforms
Will restate financial reports 'as necessary'
By Robert Schroeder, MarketWatch
Last Update: 1:54 PM ET March 8, 2005


WASHINGTON (MarketWatch) - Housing finance giant Fannie Mae agreed with its federal regulator to implement more reforms designed to shore up the troubled firm's corporate governance.

Under an agreement with the Office of Federal Housing Enterprise Oversight, Fannie (FNM: news, chart, profile) will beef up rules for accounting ledger entries, put in place a plan to stamp out problems with portfolio accounting, separate its chairman of the board and chief executive officer and take other steps.

The office, a division of the Department of Housing and Urban Development, is investigating massive losses at Fannie, which ousted its chief officers in December over an accounting scandal.

"We must put in place all necessary reforms not just to correct the problems of the past, but to also safeguard against problems emerging in the future," said Armando Falcon, Jr., the director of OFHEO.

Fannie's shares sank following the announcement and were lately trading down 50 cents to $57.50.

Stephen Ashley, the chairman of Fannie Mae's board, said the company is committed to implementing the agreement as it works to complete a restatement of its earnings.

The SEC ruled last December that Fannie overstated its profits by about $9 billion since 2001. The company has since halted quarterly financial reporting.

Part of the agreement calls for Fannie to conduct a restatement of prior earnings "as necessary."

Fannie Mae and its smaller sibling Freddie Mac (FRE: news, chart, profile) pump money into the housing market by buying mortgages from banks and repackaging them into securities. Investors around the world hold Fannie's stock and bonds, and the company is one of the largest financial services firms in the country.

The company also agreed with its regulator to create an office of compliance and ethics which will review internal complaints and whistleblower reports. The company's general counsel will also report misconduct directly to the board.


Robert Schroeder is a reporter for MarketWatch in Washington.

[lindalu]

sell Fannie Mae,
_________________
lindalu

[HenryTo]

More accounting problems at Fannie Mae. And from a Peter Primelow article: "On Thursday, the Wall Street Journal reported that the government-created mortgage monster could be forced to recognize additional losses from its derivatives portfolio of as much as $2.8 billion because of new accounting concerns raised by its chief regulator."

http://www.marketwatch.com/news/story.asp?dist=yhooquotenews&param=archive&siteid=yhoo&guid=%7BBD3CE547%2D25DC%2D428D%2DA2ED%2D93E259A5FB7B%7D&garden=&minisite=

[gregf]

somebody, PLEASE break the tie!!!

[HenryTo]

And they're all different as well!

[gregf]

only 3 votes on 70 views, hmmmm

[HenryTo]

Yes, but apparently no one listens to that.

Moral hazard is still a problem in our financial system and in society, me thinks. Look at all the marginal homeowners who are taking the huge variable mortgages - this is definitely something new.

[gregf]

$5, Jimmy is a bit pessimistic. It is interesting, neither Schwab nor Goldman have a rating on FNM, hmmmm.

It's also interesting to note what finace.yahoo.com has for a profile of FNM - that includes:

"The United States government does not guarantee, directly or indirectly, Fannie Mae's securities or other obligations."