Fannie Gets New Auditor

The mortgage giant gets an interim chief risk officer, too.
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Still reeling from last month's executive-suite shake-up,

Fannie Mae

(FNM)

named a new auditor and a chief risk officer Tuesday.

The Washington-based mortgage giant hired Deloitte & Touche as its auditor and named Adolfo Marzol interim chief risk officer. Marzol has been senior vice president for corporate strategy and previously was chief credit officer.

The appointments come less than a month after the company's top two executives were forced out by regulators taking issue with Fannie's business and accounting policies. CEO Franklin Raines and finance chief Tim Howard stepped down Dec. 21 after the

Securities and Exchange Commission's

top accountant ordered the company to restate its earnings for the past four years.

The SEC effectively ratified the findings of the Office of Federal Housing Enterprise Oversight, which concluded that the government-sponsored entity used improper accounting methods for valuing derivatives -- sophisticated financial instruments the company uses to hedge against interest rate swings.

Fannie fired its last auditor, KPMG, after the SEC made its findings public.

The faulty accounting could force Fannie to report after-tax losses on its derivatives transactions of as much as $9 billion. Some analysts say the final sum could be even higher.

The big losses are critical to Fannie, because the company is required to comply with a minimum capitalization standard set by OFHEO, its primary regulator. The company sold some $5 billion in preferred stock to institutional investors last week in an effort to close the funding gap.

Critics of the company have argued that Fannie has grown too big too fast and that it has taken on so much risk that it could undermine the health of the housing market.

On Tuesday, Fannie fell $1.36 to $69.91.