Fannie Mae leaders face possible ouster

WASHINGTON -- Federal regulators have raised the possibility of removing the management of mortgage giant Fannie Mae after finding accounting problems they described yesterday as more serious than those that brought the ouster of top executives at rival Freddie Mac.

The findings by the Office of Federal Housing Enterprise Oversight warrant ''immediate remedial action," the agency's director said in a letter to the Fannie Mae directors that was released yesterday.

In addition, ''we must consider the accountability of management and whether we have sufficient confidence in management to fully implement these corrective measures and bring about broad cultural and operational changes," Armando Falcon wrote in the letter dated Monday.

''The analysis and findings of this report make it difficult to assert such confidence."

The regulators' report, made public Wednesday following an eight-month-old investigation, found pervasive accounting problems the agency says cast doubt on the company's past earnings reports and even its financial soundness.

Management at Fannie Mae ''deliberately developed and adopted" inappropriate accounting policies, supported widespread violations of generally accepted accounting principles, tolerated lax internal controls, and failed to properly investigate an employee's concerns about accounting, the report said.

The regulators said yesterday they didn't know whether Fannie Mae will have to restate its earnings for any period from 2001-2003, or whether its earnings overall might have been overstated or understated.