Fannie Mae to Adopt New Accounting Standard

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Fannie Mae is instilling a tougher accounting standard in response to reforms demanded by its regulator, the federal Office of Federal Housing Enterprise Oversight (OFHEO).

The change, reflected yesterday in a regulatory filing, will help the mortgage giant to account for about $8 billion in manufactured home loans — mostly mortgages on mobile homes — and $300 million in aircraft leases. The mobile home sector has been overwhelmed by defaults recently and OFHEO wants the losses reported faster.

OFHEO told the Washington, D.C.-based Fannie Mae last week to incorporate the new accounting change by this Friday, the Washington Post reported, raising concerns about whether Fannie Mae would have to restate results. The need to restate results brought a major controversy down on smaller but similar federal housing finance company Freddie Mac last year. Freddie Mac's restatement was for other reasons.

Fannie Mae said in a filing with the Securities and Exchange Commission that it had conferred with the agency. And "taking into account guidance from the SEC," it had concluded that its past treatment of losses on manufactured housing and asset-backed securities was "consistent with" generally accepted accounting principles and that "no restatement of prior period financial statements is required," the Post reported.

Fannie told the OFHEO that it would recalculate its first quarter numbers to show the regulator what its results would have been had the new accounting standard been in use then. The new method will be reflected in second quarter SEC filings, which could show a change in shareholders' equity of between $240 million and $260 million for that quarter, the Post reported.

The filing showed shareholder equity in the first quarter to be $20.8 billion, a decline of $1.5 billion, the Post reported.

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