(by Mark Riley)

Fannie Mae is accused by SEC for violation of accounting principles and now faces SEC’s informal investigation.

The Office of Federal Housing Enterprise Oversight (OFHEO), Fannie Mae’s major regulator reported Fannie Mae “maintained a culture that emphasised smooth earnings at the expense of accurate financial disclosures” and “deferred expenses apparently to achieve bonus compensation targets.”

Fannie Mae and another government-sponsored company Freddie Mac own or guarantee nearly half the $7,000bn market for US mortgages. OFHEO started investigating accounting of Fannie Mae last year after Freddie Mac’s probe, which led to the restatement of earnings accounted for more than $5 billion and some its officials were fired.

OFHEO says further investigation can also lead to Fannie Mae to restate its earnings.