Fannie Shares Slide on Report

Fannie Mae(FNM Quote) dipped more than 14% on heavy volume early Friday after the company went on the defensive against a magazine report questioning its accounting measures.

Fortune, in an article published on its Web site Thursday, reported that the government-sponsored mortgage giant was masking its growing credit losses through a change in the way it reports its exposure to risky home loans.

In August, the company reported a credit-loss ratio of between 4 and 6 basis points. When the company last week reported third-quarter financial results -- including a loss that more than doubled -- it said its annualized credit-loss ratio was just 4 basis points. But that calculation was derived through a new accounting methodology from the one used to calculate the range it forecast in August. Using the old methodology, the company's credit loss ratio would be 7.5 basis points, according to Fortune.

Analysts assailed Fannie's CFO and other executives on a conference call Friday morning, in which the company attempted to explain the change, according to the Associated Press. CFO Stephen Swad said Fannie Mae expected to recover a portion of the $670 million in provisions for credit losses on bad mortgages that the company wrote off in the third quarter.

"We book what we book under [generally accepted accounting principles] and we provide this disclosure to help you understand it," Swad told the analysts, according to AP.

Fannie shares slipped as low as $36.86 before recovering. Recently, the stock was down 2.2% to $42.09.