The changes are intended to address problems the Office of Federal Housing Enterprise Oversight discovered during its investigations into accounting problems at both companies.
May of this year Fannie Mae agreed to pay $400 million to settle charges that it misstated its earnings by $10.6 billion to trigger millions of dollars in bonuses for top executives. Three years ago Freddi Mac agreed to pay $125 million to settle charges that it too misstated earnings to the tune of $5 billion.
Top executives lost their jobs over the scandals including the chief executives for both companies. Both companies, the nation's two largest sources of mortgage money, implement the flow of funds to the housing market by buying mortgages from banks and other lenders.
A few of the 'guidances' put into place are:
- The companies must include provisions about returning bonuses and salaries if executives are fired "for cause" in cases of misconduct.
- Responsibilities of board directors must go beyond short-term focus of maximizing shareholder value such as assigning the role of chairman to an independent board member.
Comment Preview