Fannie Mae reached an agreement on May 23 with the Office of Federal Housing Enterprise Oversight (OFHEO) to address concerns over an accounting scandal at the mortgage giant. But James B. Lockhart, OFHEO’s acting director, said it would take years to completely remedy the problems at Fannie Mae and at its fellow government-sponsored enterprise, Freddie Mac, which was rocked by a similar accounting scandal a couple years ago.
In the settlement, Fannie Mae agreed to take action on all of the recommendations in the OFHEO report, including addressing accounting practices, internal controls, corporate culture, disclosure, and oversight of corporate activities. Fannie Mae’s board of directors “understands that Fannie Mae has much more to do, and working with our regulators and [Congress], we intend to hold ourselves and the management team accountable for the changes that need to be made,” said Stephen B. Ashley, Fannie Mae’s chairman of the board, in testimony before the U.S. Senate Committee on Banking, Housing, and Urban Affairs in mid-June.
In his own testimony before the committee, Lockhart reiterated the Bush administration’s call for new legislation to steengthen regulatory oversight of Fannie and Freddie. He said the two companies had been “so poorly run” that it will take many years to fix their problems.
Commercial/multifamily debt passes $2.7 trillion
The amount of commercial and multifamily mortgage debt outstanding increased to more than $2.7 trillion in the first quarter of 2006, up 2.9 percent from the previous three months, according to a report from the Mortgage Bankers Association (MBA).
“Nearly every investor group continues to expand [its] investments in commercial and multifamily mortgages,” said Doug Duncan, chief economist of MBA. “Improving property markets and the continued recognition of commercial real estate as a part of a balanced portfolio are all supporting continued investor demand.”
Commercial banks hold the largest share of the mortgages, with nearly $1.2 trillion or 43 percent of the total, according to MBA. Commercial mortgage-backed securities pools are in second place with $577 billion, or 21 percent. Life insurance companies hold $269 billion, savings institutions hold $202 billion, and government-sponsored enterprises and federally related mortgage pools, including Freddie Mac, Fannie Mae, and Ginnie Mae, hold about $198 billion.