Fannie Mae has established a new senior management team, made progress on a financial restatement and changed its attitude, Daniel Mudd, the mortgage giant’s CEO, told a Senate committee today.
In prepared testimony before the Senate Banking Committee, Mudd described changes Fannie has put in place following the accounting scandal that has rocked the government-sponsored enterprise. “The days of arrogant, defiant, ‘my way’ Fannie had to end,” Mudd said. “We are making progress. And we have much more to do. I am determined to do it,” Mudd said
Fannie Mae was accused of serious accounting problems by The Office of Federal Housing Enterprise Oversight in September 2004. The Securities and Exchange Commission subsequently ordered the company to restate earnings back to 2001 — a correction expected to reach an estimated $11 billion.
The mortgage giant has continued to come under fire ever since, with OFHEO in May releasing a stinging report detailing an unethical corporate culture where Fannie Mae employees manipulated accounting and earnings to trigger bonuses for senior executives from 1998 to 2004.
Mudd has told investors and lawmakers many times that he’s trying to reform Fannie Mae.
The CEO today told senators the company replaced its onsite auditors and has more than 300 auditors overseeing the firm’s books. He said he and his management team are reorganizing Fannie’s internal audit department. There’s a new chief audit executive, with a direct line to the board’s audit committee, he said.
Lawmakers are debating tighter controls over Fannie and Freddie, but legislative action has been stalled in the Senate.