The Office of Federal Housing Enterprise Oversight says that changes still need to come at mortgage lending giants Fannie Mae and Freddie Mac.

In its annual report to Congress, the OFHEO said that the two federally subsidized businesses remain a “significant supervisory concern.”

“While both enterprises made progress in correcting their problems, especially in systems, controls and financial reporting, it has taken much more time and money to correct than the GSEs or OFHEO expected,” OFHEO director James Lockhart said in a statement.

Lockhart said that a key indicator of the companies’ improvement will be the timely filing of financial statements. Combined, the companies have restated $11 billion in earnings in recent years.

Of Fannie Mae, OFHEO said “data and systems limitations have generated extensive deficiencies, the inability to measure several risks with the higher degree of accuracy and the inability to establish controls that meet industry standards in many areas.” Adding that those deficiencies “adversely impact report accuracy and meaningfulness, impeding communication and the management of operations, risk and performance.”

At Freddie Mac, OFHEO said that the board and senior management must continue to “reshape the corporate culture, publish accurate and timely financial statements, implement long-term sustainable processes, improve overall governance and risk management capabilities, enhance information technology controls and stabilize the organizational structure.” OFHEO also said that Freddie Mac’s comprehensive plan, which was designed to return it to timely financial reporting, suffered from ineffective planning and inconsistent execution over the past year.

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