Washington (May 10, 2004) -- The head of the regulator that oversees Fannie Mae said the mortgage concern isn't using the right accounting standard for determining asset impairments and revenue recognition for manufactured housing and aircraft lease securities.

Office of Federal Housing Enterprise Oversight director Armando Falcon Jr. said Fannie Mae improperly accounted for those assets "in a way that fails to reflect losses."

"The current accounting of Fannie Mae does not reflect the earnings volatility associated with these assets, does not best reflect actual economic performance and does not recognize on a timely basis impairments of the portfolio," Falcon wrote in a May 6 letter to Fannie Mae chairman and chief executive Franklin D. Raines.

Falcon directed Fannie Mae to complete the accounting to recalculate the proper asset impairment on the securities by the close of business on May 14. The OFHEO is continuing its examination of Fannie Mae’s accounting policies and practices.

-- WebCPA staff

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