Fannie Mae Prepares to Restate ’04 Earnings

Fannie Mae said Wednesday that it believed a massive review of its accounting had uncovered all of the mortgage giant’s bookkeeping errors, clearing the way for the company to complete the restatement of its 2004 earnings by the end of this year. The company disclosed that the multibillion-dollar correction could be less than previously estimated.

The government-sponsored company, which finances one of every five U.S. home loans, also said it would miss a regulatory deadline Wednesday for filing its financial report for the second quarter of 2006. Fannie Mae hasn’t filed an earnings statement since late 2004.

Federal regulators that year accused Fannie Mae of serious accounting problems and earnings manipulation to meet Wall Street targets, and the Securities and Exchange Commission ordered the company to restate earnings back to 2001. The Justice Department has been pursuing a criminal investigation, which the company confirmed Wednesday remains open.

The anticipated correction of earnings has been estimated at around $10.8 billion. But Fannie Mae indicated Wednesday that the final amount could be lower, because some losses would be less than previously thought.

The company also said it expected an upcoming internal report to show that its financial controls remained insufficient as recently as the end of last year.

“We are committed to devoting all resources necessary to complete the restatement as expeditiously as possible,” Fannie Mae said in its SEC filing. “However, because many of the activities are sequential in nature, accelerating the completion of the restatement is difficult.”

The company said it believed that “we have identified all errors requiring restatement.”

President and Chief Executive Daniel Mudd told analysts that “we’ve made great strides” in restructuring the company.