Mortgage giant Fannie Mae has filed Form 12b-25 with the Securities and Exchange Commission (SEC)
to announce that it will be late - apparently very late - with its annual report to the regulator (Form 10-K) for the year ended December 31, 2004. The annual report was due March 15 with an automatic 15 day extension possible. Fannie did not bother to request the extension.
This was no surprise, as Fannie had announced on February 10 that it might take it as much as a year to figure out and restate its earnings after being ordered by its regulator, the Office of Federal Housing Enterprise Oversight (OFHEO), to do so. The corporation is accused of misstating both earnings and expenses for the years 2001 to 2004.
Meanwhile, Armando Falcon, the Director of OFHEO in an interview with Rob Blackwell for American Banker Online echoed earlier statements by Federal Reserve Chairman Alan Greenspan that both Freddie Mac and Fannie Mae need to reduce or at least limit their huge mortgage portfolios
Mr. Falcon stated that 'flawed' control systems at both mortgage corporations had not kept up with the growth of these portfolios. He said that such flawed controls, which had recently been addressed in two written agreements with OFHEO, included Fannie Mae employees falsifying signatures (whose signatures was not made clear) and overwriting information in databases. Such problems, Mr. Falcon said were not 'isolated incidents.'
The director also said that the agency was weighing a fine against Fannie. Seems fair since the agency fined Freddie Mac $125 million when its similar transgressions came to light a year earlier.