Raines Retires From Fannie Mae

The board of directors is working with executive search firm Spencer Stuart to find permanent replacements. The audit committee also dismissed KPMG LLP as the company's independent auditor and has begun a search for a new auditor.

The moves come after a rough few months for the company. In September, the Office of Federal Housing Enterprise Oversight released a report based on an eight-month investigation concluding that the government-sponsored enterprise had manipulated earnings and engaged in dubious accounting practices.

And in a Form 8-K filing to the Securities and Exchange Commission in October, the company noted that eight lawsuits against it have either been filed or are in the process of being prepared. Holders of the housing mortgage lender's securities are behind the lawsuits, which, for the most part, accuse Fannie Mae of securities violations with regard to recently scrutinized accounting procedures. Raines and Howard were both named in the suits that had been officially filed at that time.

"I previously stated that I would hold myself accountable if the SEC determined that significant mistakes were made in the company's accounting," Raines says in a statement. "Although, to my knowledge, the company has always made good faith efforts to get its accounting right, the SEC has determined that mistakes were made. By my early retirement, I have held myself accountable."

Ann Korologos, the presiding director of the non-management members of the board, says Fannie Mae's board "takes these steps today to move the company forward to serve its critical mission in a safe and sound manner. Together, we will continue responding to the issues identified by OFHEO to ensure that the Fannie Mae of tomorrow is safe, sound, stable and even more able to achieve its mission."

The board says it continues to move forward to comply with OFHEO. Measures taken so far include the hiring of independent organizational and compensation consultants; submission and approval of a detailed implementation plan for the agreement; and submission of detailed work plans for the organizational and compensation reviews. Board member Donald B. Marron will continue leading the work on the company's capitalization plan.

The board further said that the independent investigation commissioned by its Special Review Committee is proceeding to look into the findings of OFHEO's report. The investigation is focused on accounting issues including accounting policies procedures and controls regarding FAS 91 and FAS 133, organization, structure and governance, board oversight and management responsibilities and resources and executive compensation.