NEW YORK - As accountants and regulators continue to sift through Fannie Mae's (FNM) books, they keep finding new reasons for investors to be nervous, Monday's Wall Street Journal reported.

One of the thorniest issues now being examined is whether the government- sponsored mortgage company has failed to account properly for the trusts it sets up to issue mortgage-backed securities, known as MBS. If so, Fannie may face an even tougher challenge than it already has in raising its capital to meet regulatory requirements.

In an interview, Armando Falcon Jr., director of the Office of Federal Housing Enterprise Oversight, or Ofheo, Fannie's main regulator, confirmed that Ofheo is looking at the accounting for these trusts. He said Ofheo still is trying to quantify the potential problem. A Fannie spokesman declined to estimate the potential impact of any flaws found.

Fannie's accounting in general is under scrutiny because regulators last year found that the company had violated accounting rules on the treatment of derivatives used to hedge interest-rate risks. That prompted the Securities and Exchange Commission to order a restatement of Fannie's results for the past several years, an immensely complex undertaking that may take years. It also prompted Fannie to replace KPMG LLP as its outside auditor with Deloitte & Touche LLP. Bringing in a new auditor means rethinking many of the company's accounting practices.

The resulting uncertainty has slammed Fannie's stock price, which closed at $ 53.24 Friday, down 25% this year.

Wall Street Journal Staff Reporters Jonathan Weil, Dawn Kopecki and James R. Hagerty contributed to this report. Dow Jones Newswires 04-04-05 0015ET Copyright (C) 2005 Dow Jones & Company, Inc. All Rights Reserved.