Magazine article American Banker

Fannie Expects a Smaller Loss

Magazine article American Banker

Fannie Expects a Smaller Loss

Article excerpt

WASHINGTON -- Fannie Mae said it expects its financial restatement to be less than the $10.8 billion it originally estimated.

In a filing Wednesday with the Securities and Exchange Commission, the government-sponsored enterprise also said it had uncovered another accounting mistake.

Last year Fannie said that changes to its accounting for derivative instruments and hedging relationships would likely result in an $8.4 billion cumulative loss, while changes to its accounting for mortgage commitments would result in an additional loss of $2.4 billion.

But in the filing, the GSE said it expects the cumulative loss relating to mortgage commitments to be "significantly smaller ... due to certain offsetting gains on mortgage commitments." It did not provide a new estimate.

Fannie began the restatement process in 2004 after its regulator uncovered several accounting mistakes and poor internal controls.

The new error relates to master servicing arrangements, but Fannie said that correcting it "will have an insignificant impact on regulatory capital," and that it believes it has uncovered all errors that require restatement.

Fannie also said it might petition the Office of Federal Housing Enterprise Oversight early next year for permission to increase its mortgage portfolio. In a May 23 consent order, Fannie agreed to cap the portfolio at $727 billion. The GSE said its June 30 level was $720 billion.

The cap is expected to remain until Fannie has returned to timely filing with the SEC and resolves issues with its internal controls. …

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