Risk & Compliance

Fannie Mae Cooperation ”Spotty”

Deadlines are missed, submissions are incomplete, maintains the director of the mortgage giant's federal overseer.
Stephen TaubJuly 15, 2004

The head of the Office of Federal Housing Enterprise Oversight — which is conducting a broad investigation of Fannie Mae after its smaller sibling, Freddie Mac, became embroiled in an accounting scandal — doesn’t feel he’s getting all the help he should.

“The cooperation has been spotty, but there are many demands that are being placed on [Fannie Mae] with regards to documents and access to employees,” said Armando Falcon, director of the Office of Federal Housing Enterprise Oversight, during testimony before Congress. The remark came in response to a question from Rep. Richard Baker (R-La.), according to the Associated Press.

Speaking to reporters afterward, Falcon said, “We’re making progress, but we could be doing better if we had complete submissions and more timely availability of employees,” according to Reuters.

“We’ve had some instances where deadlines have been missed without explanation, submissions in response to requests for information that weren’t complete — even though there were assertions that they were complete,” Falcon added, according to the AP. “Also problems in getting employees scheduled for interviews in a timely enough manner.”

A Fannie Mae spokesman declined to respond.

In any other era, Falcon’s remarks might have been simply an act of frustration. However, in this new era of strict corporate governance standards and a tougher Securities and Exchange Commission, the regulator’s comments come with dire implications.

In recent months the commission has been cracking down on companies that have not cooperated with investigations. For example, recently the SEC fined Gemstar-TV Guide International Inc. $10 million in settlement of charges that the company overstated revenues by nearly $250 million. Part of the fine was based on Gemstar’s initial failure to cooperate in the commission’s investigation or undertake remedial actions, according to the SEC. The SEC has recently taken similar action against a number of other companies.

For his part, Rep. Baker responded during Falcon’s testimony by volunteering his subcommittee’s help in “encouraging a cooperative environment,” the AP reported, so OFHEO can determine Fannie Mae’s financial condition.

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