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WASHINGTON, DC-Fannie Mae has agreed to follow the Office of Federal Housing Enterprise Oversight’s instructions for making changes to its internal operations. The housing mortgage lender, a government-sponsored enterprise, will, among other new practices, increase its capital reserves to 30% of its holdings; a significant jump from its current practice of maintaining a cushion of 18%.

The new guidelines come after a Sept. 20 report from OFHEO which concluded that, following an eight-month investigation, Fannie Mae had manipulated earnings and engaged in dubious accounting practices. Freddie Mac, the other GSE mortgage lender, was also discovered to have incorporated deceptive accounting practices, resulting in a multi-billion restatement of earnings last year. The new OFHEO guidelines are designed to assure appropriate and honest operations within the corporation.

“We are in full support of today’s agreement, says Fannie Mae chairman and CEO Franklin D. Raines. “Working with the board [of Directors] and the company’s regulators, we will begin to take steps immediately to comply with and implement the terms of the agreement.” Under the agreement, Fannie Mae will also conduct regular reviews of internal accounting controls and will share those reviews with OFHEO.

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