Beleaguered mortgage finance giant Fannie Mae agreed under pressure from its federal regulator Tuesday to split the roles of chief executive and board chairman at the company to improve governance, the company and its oversight agency said Tuesday.
Fannie Mae's regulator, the Office of Federal Housing Enterprise Oversight, said it had come to terms with Fannie Mae's board of directors on addressing deficiencies in internal controls, corporate governance and accounting systems.
The fresh accord comes after the company agreed last fall to hold more capital in reserve after a government investigation uncovered pervasive accounting problems.
In addition, two House of Representatives Financial Services panels Tuesday announced hearings into recent developments at Fannie Mae.
Shares of Fannie Mae fell 51 cents to $57.49 on the New York Stock Exchange.
The new agreement lays out steps the company must take to strengthen internal financial controls and accounting policies and practices to ensure they conform to regulatory standards, said Fannie Mae Chairman Stephen Ashley.
"The company also agreed to take steps to strengthen its corporate governance, including the segregation of duties between Fannie Mae's chief executive officer and chairman of the board, and enhance the company's compliance and ethics functions, which will report directly to the CEO and to the board's audit committee," Ashley said in a statement.
Fannie Mae agreed in September to keep billions of dollars more in cash on hand while it corrected accounting problems from January 2001 to September 2004 that the company has said could lead to an after-tax loss of $9 billion.
In December, Fannie Mae CEO and Chairman Franklin Raines retired and Chief Financial Officer Timothy Howard resigned as securities regulators questioned the company's accounting and demanded a restatement of results.
Chief Operating Officer Daniel Mudd was named interim CEO to succeed Raines, and Executive Vice President Robert Levin was named interim CFO.
Rep. Richard H. Baker (R-La.) said Tuesday that he would hold a meeting of the capital markets, insurance and government-sponsored enterprises panel he chairs on April 5 to review the accord between Fannie Mae and the Office of Federal Housing Enterprise Oversight.
Also, the committee's oversight and investigations panel announced a hearing Thursday on transactions between Fannie Mae and a North Carolina mortgage firm whose principals were convicted of fraud.
A federal court in that state ordered Fannie Mae to forfeit $6.5 million in funds determined to have come from fraudulent activities on the part of First Beneficial Mortgage.