Magazine article American Banker

Fannie Mae Places Its 53 Debt Sellers on Probation

Magazine article American Banker

Fannie Mae Places Its 53 Debt Sellers on Probation

Article excerpt

Moving to "restore integrity" to sales of its long-term securities, the Federal National Mortgage Association placed all 53 firms that sell its debt on probation for one year.

The congressionally chartered mortgage agency, known as Fannie Mae, said Monday it found the entire debenture-selling group guilty of improprieties that included exaggerating customer demand, misstating actual purchases, or buying Fannie Mae debentures for their own accounts without permission.

Condition Imposed

In a letter to the 53 selling agents, Fannie Mae chairman James A. Johnson termed the violations of current procedures "unacceptable" and imposed new conditions for remaining in the group.

About half the members of the selling group, which issued $26 billion of long-term debt this year through November are banks or affiliates of bank holding companies. (Group members are listed on page 12.)

Buyers Must Be Notified

Mr. Johnson said that to avoid being banned from Fannie Mae sales, the banks and securities firms must notify all buyers of Fannie Mae debt between September 1988 and September 1991 of the one-year probation. Also, the firms must accept a new seller agreement that requires them to:

* Maintain records for three years after each sale.

* Give Fannie Mae auditors access to detailed information about customers.

* Notify Fannie Mae of any government inquiry related to the sale of the securities.

* Provide training for traders.

Probe Began in September

The new agreement also deletes the prohibition against buying debentures as principal. …

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