WASHINGTON – The Office of Federal Housing Enterprise Oversight reached an agreement with Fannie Mae that requires the housing Government Sponsored Enterprise to implement reforms that “address deficiencies” in internal controls, corporate governance and accounting systems. By signing the agreement with OFHEO on March 7, Fannie Mae agrees to the following: Internal Controls: * The implementation of controls surrounding accounting ledger journal entries including policies that prohibit the falsification of signatures; require due diligence by approving official; and require proper documentation. * The development and implementation of a plan to address deficiencies in the portfolio accounting systems so that the systems are able to properly calculate amortization and account for certain assets. * The adoption of internal controls that limit the ability of personnel to overwrite database records. Corporate Governance: * Separation of the positions of Chairman of the Board and CEO. * Review of legal and regulatory compliance structures. * Creation of an Office of Compliance and Ethics at Fannie Mae to review internal complaints, whistleblower reports and other ethics matters. * Require the General Counsel to report directly to the Board actual or possible misconduct. Accounting: * Conduct a restatement of prior period financial statements as necessary, and focus attention on issues raised by OFHEO related to SFAS 115, 140, 65, 149, and FIN 46. The agreement further states that it does not preclude additional actions in the ongoing review of Fannie Mae by OFHEO. The House Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises chaired by Rep. Richard Baker (R-La) will meet on April 5 to review OFHEO’s supplemental agreement with Fannie Mae’s board. Baker commended OFHEO for reaching the agreement with Fannie Mae, but he said the agreement “also raises many disturbing questions, especially about tampering with records, and we need to know the nature of the records and the extent of this outrageous practice.” Commenting on the agreement reached with OFHEO, Fannie Mae Chairman Stephen Ashley said it “represents the next step in Fannie Mae’s cooperative effort to address issues raised by OFHEO in its ongoing review of the company and strengthen the company’s corporate governance.” He further stated that Fannie Mae’s Board and management team are committed to working with OFHEO to carry out the agreement as the company continues the process of completing the restatement and re-audit of its prior financial statements. -

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