In a regulatory filing, the Federal National Mortgage Association (FNMA, or Fannie Mae) disclosed still more accounting errors on Tuesday. The newly discovered problems concern how Fannie Mae accounts for certain securitization transactions and how it recognizes guarantee fees for mortgage-backed securities.
As a result, the company warned, it will not file its March quarterly results on time.
Two months ago, Fannie Mae revealed a litany of other accounting errors that have delayed its 2005 annual report. In addition, it does not expect to complete its 2004 report — which will include restated results for periods from January 2001 through the second quarter of 2004 — until at least the second half of 2006.
Although it is in violation of New York Stock Exchange listing requirements, the company asserted in its filing that “the NYSE has notified us that it has granted our request for the continued listing of our common stock and other listed securities.”
Fannie Mae added it will conclude that its internal control over financial reporting for both 2004 and 2005 were ineffective and that as of December 31, 2004, there was the presence of material weaknesses.
The company also announced a stock repurchase program that would permit the repurchase of up to $100 million of Fannie Mae shares from employees below the level of vice president. Since April 2005, the company noted, it has prohibited all employees from buying or selling Fannie Mae securities except in cases of financial hardship.
“Management is concerned that the prolonged nature of this trading ‘black-out’ has adversely affected employee morale and created an employee retention issue at a time when management believes that retaining our employees is particularly important,” Fannie Mae noted in its filing.
Fannie added that it received permission to proceed with the program from its federal regulator, the Office of Federal Housing Enterprise Oversight.
Under the program, the company may repurchase shares at market prices only during a 30-trading day period following certain regulatory filings. Officers and board members are not eligible to participate.