Skip to comments.Fannie Notes More Accounting Problems: NYSE Listing Under Review
Posted on 11/10/2005 10:01:09 AM PST by ex-Texan
NEW YORK (MarketWatch) -- Fannie Mae said Thursday it's uncovered new accounting problems in the course of an ongoing review, with the mortgage giant identifying more than $10 billion in issues related to derivatives, insurance accounting and other matters.
In a filing with the Securities and Exchange Commission, the Washington-based company (FNM:Fannie Mae), which has previously said it will restate several past periods of financial results, now expects that its 2005 annual financial report won't be completed before the second half of 2006.
Fannie also said the New York Stock Exchange is reviewing the company's listing since it's been unable to file results in a timely manner. It also said the exchange has filed a proposed rule change with the SEC that would allow it to keep Fannie Mae listed.
In the filing, the company said it has identified a problem related to hedge accounting that will lead to an estimated net cumulative aftertax loss of about $8.4 billion as of Dec. 31, 2004.
Further, Fannie said it identified errors that will cost it $2.4 billion to remedy related to misapplied cash-flow hedge accounting for its mortgage commitments.
The company also said it's reviewing its accounting for certain insurance transactions and, to date, has "determined that one mortgage insurance policy did not transfer sufficient underlying risk of economic loss to the insurer, and therefore does not qualify for accounting as insurance."
The company also said it's booked a $257 million aftertax charge for the effects of Hurricane Rita and Hurricane Katrina.
Fannie's exposure to losses as a result of the hurricanes "arises primarily from its guaranty of principal and interest payments due to holders of Fannie Mae MBS secured by property in the affected areas, its portfolio holdings of mortgages and mortgage-related securities secured by property in the affected areas, and real estate that it owns in the affected areas," the company said in its filing.
It also identified problems with its accounting for investments in low-income-housing tax credits and synthetic-fuel businesses.
Also Thursday, Fannie said it's named Robert Blakely chief financial officer, with Mike Williams taking over as chief operating officer.
It also said Bridget Macaskill, former CEO and chairman of Oppenheimer Funds Inc., will join its board as of Dec. 1, and that Fred Malek will retire from the board.
Fannie Mae shares fell 1.9% to $45.51 in early trade Thursday.
Prepare for the "already posted" police. They are out in full swing today.
Funny how discovering accounting errors only seem to turn up the fact that money is missing. How come we never read about companies who discover accounting errors that result in the company having more money than they thought they did?
Come on... What's up with that?
Axtually, Freddie Mac did reveal that earned more than it reported. Both of these companies used very sophisticated, and apparently not kosher, accounting techniques to "smooth" their earnings, which are normally very volatile. They thought investors would value their stock more highly overall if their earnings were more regular than if earnings went up and down a lot. That's how they got into trouble.
Actually, that's how they originally tried to spin it.
lol, now that's funny.
" (FNM:Fannie Mae), which has previously said it will restate several past periods of financial results,"
I wonder if any of it happened when Jamie Gorelick (!) used to run Fannie Mae...
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