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More errors found in Fannie Mae's books
By TIMES WIRES
Published May 10, 2006
More errors have turned up in Fannie Mae's government-ordered review of its accounting, the mortgage giant disclosed Tuesday. It also said it doesn't expect the review to be finished before the second half of the year. The government-sponsored company, which finances one of every five home loans in the United States, said it had found accounting errors in addition to those it disclosed on March 13. Federal regulators in 2004 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 - a correction expected to reach an estimated $11-billion. The Justice Department is pursuing a criminal investigation. Washington-based Fannie Mae said the newly disclosed accounting errors involve transactions in its business of buying home mortgages from banks and other lenders and bundling them into securities, and the guaranty fees it charges the banks and other lenders. Similarly, Fannie Mae in March disclosed new accounting problems that had been uncovered in several areas, including loans, investment securities, houses acquired through foreclosures, interest on delinquent home loans and reverse mortgages. State Farm sued by Gulf Coast homeownersA lawsuit filed Tuesday by nearly 700 Gulf Coast homeowners accuses State Farm Insurance Co. of using a "one-size-fits-all" engineering report as the basis for refusing to cover damage to homes destroyed by Hurricane Katrina. The homeowners' suit, which represents one side of a legal argument, alleges that the insurer denied many of their claims without investigating whether Katrina's wind or water was responsible for damage to their homes. Instead, the suit claims, an engineering firm hired by State Farm drafted a generic, "one-size-fits-all" report that concludes all damage to Gulf Coast homes was caused by "storm surge" and not hurricane-force winds. State Farm's policies cover wind damage, but storm surge is considered flood water and is excluded from coverage. The report is "patently biased" because it concludes that Katrina's storm surge arrived before its wind could do any damage, the lawsuit argues.
[Last modified May 10, 2006, 06:39:06]
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