WASHINGTON, April 4 (UPI) -- Fannie Mae's main regulator wants to know if the government-sponsored mortgage firm properly accounted for its trusts used to issue mortgage-backed securities.
Armando Falcon Jr., director of the Office of Federal Housing Enterprise Oversight, confirmed to the Wall Street Journal his office is looking at the accounting for these trusts known as MBS and to quantify the potential problem.
A Fannie Mae spokesman declined to estimate the potential impact of any flaws found in these trusts, the Journal said.
The trust issue is important because Fannie Mae is the guarantor for about $1.4 trillion of MBS held by other investors.
Regulators last year found Fannie Mae had violated accounting rules on the treatment of derivatives used to hedge interest-rate risks, the Journal said. That led to an SEC order to Fannie Mae to restate its results for the past several years.
Fannie Mae already is struggling to shore up its capital, depleted by losses on the derivatives. Without the trust issue, Fannie Mae currently is $4.5 billion short of the capital it needs by Sept. 30 to meet its minimum requirement, the Journal said.
