Magazine article Mortgage Banking

HUD Announces Review of Fannie, Freddie Investments

Magazine article Mortgage Banking

HUD Announces Review of Fannie, Freddie Investments

Article excerpt

The Department of Housing and Urban Development announced it will undertake a review of Fannie Mae and Freddie Mac's debt and equity investments to ensure that the government-sponsored enterprises (GSEs) are in compliance with their congressionally mandated charter.

HUD's announcement in June followed a stinging report of Fannie Mac's accounting irregularities by the Office of Federal Housing Enterprise Oversight (OFHEO) in May. Among other things, OFHEO cited Fannie for its failure to comply with generally accepted accounting principles (GAAP), as well as its "serious problems" with internal control, financial reporting and corporate governance (see Mortgage Banking, July 2006, p. 12).

HUD said it will examine the investments to determine if they are consistent with the GSEs' charter authorities and public purposes, and whether each company is using the benefits it derives as a GSE for the purposes Congress intended.

In particular, the HUD review will focus on transactions classified on Fannie's and Freddie's financial statements as "other assets/other liabilities," according to HUD Secretary Alphonso Jackson.

"Financial transparency is in the best interests of all Americans. The lack of transparency as it relates to the GSEs' financial dealings is a regulatory concern," Jackson said in a statement. …

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