Three former Fannie Mae executives have agreed to pay $31.4 million in penalties and restitution to settle charges that they manipulated earnings from 1998 to 2004.

The settlement, with former Fannie Mae Chairman and Chief Executive Officer Franklin Raines, former Chief Financial Officer J. Timothy Howard, and former controller Leanne G. Spencer, represents about one-seventh of the $215 million in civil penalties and restitution regulators said they would seek in filing charges with an administrative law judge in December 2006 (see Inman News story).

At the time, the Office of Federal Housing Enterprise Oversight said that Raines should repay $84.6 million in bonuses, performance pay and stock options he collected between 1998 and 2003. The government also sought the return of $27.3 million Howard received in options and bonuses during the same period, and $5.6 million from Spencer.

Raines received a $19 million severance package when he took early retirement from Fannie Mae in December 2004, and an outside arbitrator awarded him an additional $2.6 million after Raines charged that he was owed more (see story).

Under the terms of the settlement announced today by OFHEO, Raines will relinquish the largest amount — $24.7 million — a total that includes the surrender of Fannie Mae stock options originally valued at $15.6 million. Raines will also pay $2 million to the government and donate $1.8 million in proceeds from the sale of Fannie Mae stock to programs to assist troubled homeowners.

Howard agreed to relinquish $6.4 million, including a $750,000 payment to the U.S. government and the surrender of stock options once valued at $5.2 million. Spencer agreed to pay $275,000 and waive any claims for compensation against Fannie Mae.

The payments each of the former exeutives are required to make to the government will be covered by insurance, and the surrendered stock options are worthless, the Associated Press reported, citing unnamed sources.

In 2006, Fannie Mae restated $6.3 billion in earnings from 2001 through part of 2004 and agreed to pay $400 million but admitted no wrongdoing in settlements with OFHEO and the Securities and Exchange Commission.

OFHEO fined Fannie Mae’s sister company, Freddie Mac, $125 million after a 2003 investigation led to a $5 billion restatement of earnings, and last year the company reached a $50 million settlement with the SEC. Freddie Mac also paid out $410 million to settle securities class-action and shareholder derivative lawsuits related to its accounting practices.


What’s your opinion? Leave your comments below or send a letter to the editor.

Show Comments Hide Comments


Sign up for Inman’s Morning Headlines
What you need to know to start your day with all the latest industry developments
Thank you for subscribing to Morning Headlines.
Back to top
Real estate news and analysis that gives you the inside track. Subscribe to Inman Select for 50% off.SUBSCRIBE NOW×
Log in
If you created your account with Google or Facebook
Don't have an account?
Forgot your password?
No Problem

Simply enter the email address you used to create your account and click "Reset Password". You will receive additional instructions via email.

Forgot your username? If so please contact customer support at (510) 658-9252

Password Reset Confirmation

Password Reset Instructions have been sent to

Subscribe to The Weekender
Get the week's leading headlines delivered straight to your inbox.
Top headlines from around the real estate industry. Breaking news as it happens.
15 stories covering tech, special reports, video and opinion.
Unique features from hacker profiles to portal watch and video interviews.
Unique features from hacker profiles to portal watch and video interviews.
It looks like you’re already a Select Member!
To subscribe to exclusive newsletters, visit your email preferences in the account settings.
Up-to-the-minute news and interviews in your inbox, ticket discounts for Inman events and more
1-Step CheckoutPay with a credit card
By continuing, you agree to Inman’s Terms of Use and Privacy Policy.

You will be charged . Your subscription will automatically renew for on . For more details on our payment terms and how to cancel, click here.

Interested in a group subscription?
Finish setting up your subscription