Fannie Mae, Freddie Mac Warned on Accounting

Washington Post (04/22/08) P. D1; Hilzenrath, David S.
In a warning to Fannie Mae and Freddie Mac, the Office of Federal Housing Enterprise Oversight (OFHEO) said action could be taken against them for any concerns raised by their treatment of the new FAS 159 accounting rule regardless of whether they technically are in compliance. FAS 159 permits adjustments to a company's books on a quarterly basis to take into account fluctuations in the value of assets and liabilities, and OFHEO is urging full documentation of these adjustments to avoid applying them retroactively. While the agency has not completed its evaluation of Fannie Mae and Freddie Mac's implementation of FAS 159, OFHEO noted that the new rule bolstered Freddie Mac's capital by $1 billion at the start of the year. The agency stated, "If OFHEO detects patterns of use of the fair value option that impair transparency or distort earnings or capital, OFHEO will evaluate whether such application of the [rule] is unsafe and unsound."