Although Fannie Mae was scheduled to meet its excess capital requirement set by the Office of Federal Housing Enterprise Oversight - potentially allowing the firm to slow portfolio reduction - the recent unveiling of alleged new accounting violations at the firm make the future of Fannie's mortgage holdings growth uncertain. MBS analysts see this as an additional setback for the mortgage market.

According to published reports, Fannie's improprieties include the overvaluing of assets, underreporting credit losses as well as misusing tax credits. OFHEO was the first to respond to the new allegations. The GSE regulator issued a release stating that Fannie would likely meet its September capital target deadline based on current assessments and estimates. Fannie followed up by noting in a statement that it has already disclosed the estimated impact of the "most significant" items affecting its earnings through its August 12b-25 filing with the Securities & Exchange Commission.

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