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Franklin Raines out at Fannie
Daniel Mudd named interim CEO, finance chief Timothy Howard also quits, replaced by Robert Levin.
December 22, 2004: 8:24 AM EST

NEW YORK (CNN/Money) - Fannie Mae ousted CEO Franklin Raines and finance chief Timothy Howard after regulators found accounting problems at the giant mortgage company.

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Fannie Mae's embattled chief executive is stepping down along with Howard, the company said in a statement late Tuesday night. Fannie Mae also said it has fired its independent auditor, KPMG.

"Although to my knowledge the company has always made good faith efforts to get its accounting right, the SEC has determined that mistakes were made. By my early retirement, I have held myself accountable," Raines said in a three-paragraph statement.

Fannie Mae (Research), the nation's largest mortgage finance company, was created by Congress to help low- and middle-income families buy homes.

Its huge and complex finances have come under fire for months, and last week the Securities and Exchange Commission found Fannie Mae had violated accounting rules and will need to restate earnings for the past four years.

The company has said the restatement may force it to record a loss of up to $9 billion over 2001 to 2004.

Armando Falcon Jr., the director of the Office of Federal Housing Enterprise Oversight, which has direct authority over Fannie Mae, applauded Tuesday's changes.

Frankline Raines stepped down under pressure after regulators cited accounting problems at the giant mortgage firm.

"We are encouraged that the board's announcement signals a new culture and a new direction for Fannie Mae," he said in a written statement.

OFHEO had said it wanted major changes in top management, including the replacement of Raines, 55, as CEO.

As part of the shakeup, Fannie Mae's board said Daniel Mudd, currently vice chairman and chief operating officer, would become interim CEO.

It also tapped executive vice president Robert Levin to serve as interim chief financial officer.

"Fannie Mae's board of directors takes these steps today to move the company forward to serve its critical mission in a safe and sound manner," said board member Ann Korologos.

Franklin D. Raines
Corporate Governance
Fannie Mae
Accounting and Audits
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The company also named Stephen Ashley, who has served on the board since 1995, as the non-executive chairman of the board.

"We are confident in the leadership ability of Dan Mudd and Rob Levin to work with the board as well as the company's safety and soundness regulator, Congress, the housing industry, and all of the company's stakeholders," Korologos said.

"Together, we will continue responding to the issues identified by OFHEO to ensure that the Fannie Mae of tomorrow is safe, sound, stable and even more able to achieve its mission."  Top of page

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