Risk & Compliance

Get Up to Speed, OFHEO Tells Fannie Mae

Regulator gives the mortgage giant 30 days to submit a remediation plan for its outmoded manual accounting systems.
Stephen TaubFebruary 27, 2004

The Office of Federal Housing Enterprise Oversight, which oversees Fannie Mae and Freddie Mac, has raised concerns that Fannie Mae’s archaic accounting systems could lead to more problems at the mortgage giant, according to Dow Jones.

In a letter to Fannie earlier this week, reported the wire service, the OFHEO criticized it for relying on 70 outmoded manual accounting systems as opposed to fully automated and integrated systems. The agency told Fannie Mae officials to submit a remediation plan within 30 days, according to the report.

The term “manual accounting systems” typically refers not to pencil-and-paper accounting, explained Dow Jones, but to computer programs that are separate from the main accounting program and that allow for manual overrides. They are a concern to regulators like the OFHEO because they create more room for human error and thus require more review and controls.

The critical letter is just the latest rebuke from the regulator.

Earlier this month the OFHEO awarded a contract to Deloitte & Touche LLP to buttress the regulator’s efforts in conducting a special examination of Fannie Mae’s accounting.

In December the OFHEO fined Freddie Mac $125 million for actions that led to its recent restatement of financials Fannie Mae’s smaller sibling was forced to restate its accounting by nearly $5 billion. And last month the agency ordered Freddie Mac to increase its minimum capital requirement by 30 percent due to the higher operational risk arising from the scandal.

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