Fannie Mae reduces first-quarter dividends

OFHEO on Dec. 21 classified Fannie Mae as significantly undercapitalized as of Sept. 30, which requires the director of OFHEO’s approval before the payment of any dividend on Fannie Mae’s capital stock. The Fannie Mae Board of Directors will continue to assess dividend payments for each quarter, and OFHEO has indicated that it will continue to review dividend payment requests for each quarter based on the facts and conditions at the time.

“The Board of Directors believes that this is a prudent and responsible action to take as the company moves expeditiously to increase its capital,” said Stephen Ashley, nonexecutive chairman of the Fannie Mae Board of Directors, in a news release.

Fannie Mae has submitted a capital restoration plan to OFHEO for its review and approval and is working with OFHEO to address any comments or concerns. “We look forward to continue working with OFHEO to attain the capital restoration plan,” Ashley added. Reducing the common stock dividend will contribute toward building Fannie Mae’s capital to a 30 percent surplus over its minimum capital requirement.

In other news, Fannie Mae announced Jan. 4 that the board’s audit committee approved the engagement of Deloitte & Touche LLP as its independent auditor to perform an audit of 2004 and a re-audit of prior period financial statements back to 2001, which will be restated.

“Fannie Mae has committed to work with our safety and soundness regulator, OFHEO, to begin restating the company’s financial statements,” added Daniel Mudd, interim CEO.

The board also announced Jan. 4 that, in accordance with its agreement with OFHEO, Adolfo Marzol, Fannie Mae’s senior vice president for corporate strategy, will serve as the interim chief risk officer for the company. Marzol previously served as chief credit officer for the company.

Franklin D. Raines, chairman and CEO, and Timothy Howard, Fannie Mae vice chairman and chief finacial officer, resigned in December following the news that results would have to be restated.