Fannie Mae announced that it will adopt the stiffer accounting standard required by the agency that oversees the mortgage giant’s operations. The company reported in a regulatory filing, however, that it wouldn’t restate prior results, insisting that its accounting practices are “consistent with GAAP.”
The mortgage giant said the decision took into account guidance from the Securities and Exchange Commission. Last week, the Office of Federal Housing Enterprise Oversight (OFHEO), the federal agency that oversees Fannie Mae, ordered the company to change its accounting practices. The changes concern impairments in two categories of securities: manufactured housing and aircraft leases.
Fannie Mae defended its practices, arguing that its impairment losses for the quarter ended March 31 “were determined in accordance with our existing policies for estimating impairment.”
At the same time, the mortgage company added that it would implement the OFHEO’s new estimation process for identifying, measuring, and recognizing other-than-temporary impairment on debt securities during the second quarter of 2004. “We have met with OFHEO staff to discuss implementation of the directive and to refine the prescribed process for determining other-than-temporary impairment,” the company added in the filing.
Fannie Mae reported that it will account for the change in its estimates on a prospective basis and will detail the change in its 10-Q filing for the second quarter of 2004. The change in estimate will result in added impairment losses in the second quarter of 2004.