A bitter struggle among directors of Federal National Mortgage Association has led to an impasse there, halting consideration of plans for future housing mortgage projects and leading to reports of "antagonism" by company officers toward the board.
At the heart of the conflict is management's opposition to increased direction of FNMA's operations by Secretary of Housing and Urban Development Patricia Roberts Harris.
The issue boiled over at a meeting of the FNMA board Tuesday, at which a majority of non-management directors voted to censure the management itself for distributing allegedly inaccurate and incomplete information to the press about the previous meeting in October.
But because FNMA chairman Oakley Hunter and two other company officers on the board decided there was no conflict of interest involved in voting on a resolution of self-censure, the motion was defeated, 8 to 6.
The impasse that remains, however, may result in administration proposals to restructure the company.
Federal National Mortgage (nicknamed Fannie Mac) is the nation's largest single owner of home mortgages ($34.2 billion). Originally a government agency designed to aid the flow of mortgage financing by purchasing and selling home mortgages during periods of tight money or easy credit, Fannie Mae was transformed into a private firm in 1970 and its stock now is traded on the New York Stock Exchange.
The company's role remained unchanged, however, and HUD was designated as the agency responsible for regulating Fannie Mae. Ever since, there has been a gradual increase in criticism about the focus of Fannie Mac - directed specifically to an alleged lack of interest in inner city housing and attention to profits rather than the need to finance housing, charges denied by Hunter.
When the Carter administration took power, a number of HUD officials and members of Congress took aim at Fannie Mae. By her actions, HUD Secretary Harris has indicated she wants to take more of an activist role in guiding the company's operations than during previous administrations. She also supported legislation to expand the number of government-appointed directors on FNMA's board.
The conflict has been brewing quietly all year, but it was brought into the open Oct. 19. On that day, FNMA issued a press release stating that the board the previous day had rejected by 11-1 a recommendation for the ouster of chairman Hunter and two other officers, executive vice presidents Lester Condon and Robert Bennett.
(The board consists of three company difficers and seven outside directors elected by stockholders and five members named by the President.)
The catalyst for action at the October meeting was a long statement by board member Julian H. Zimmerman, head of a Texas investing firm and a stockhold-elected FNMA director.
Zimmerman accused Fannie Mae's management of withholding vital policy issues from the board, ignoring the board in actions where management disagreed and failing to achieve a meaningful working relationship with the new people at HUD.
As reconstructed by The Washington Post from talks with Fannie Mae insiders and others, Zimmerman did not issue his statement as a motion. But a management director sought a vote of confidence on the issue and 11 members voted against asking for Jimter's resignation. Zimmerman was in favor and two government-nominated members abstained.
But the supposed vote of confidence, several sources said, was temporary in nature and based on the premise that three other matters of substance would come before the board at Tuesday's meeting - whether to split the positions of chairman and president (Hunter holds both today), defining relations with HUD and setting up a process to select Hunter's successor.
FNMA did not report to the press that two directors had abstained or that the vote was tied to an understanding about future consideration of the three sensitive issues.
Because of what government-appointed directors saw as an attempt to create a public impression of a vote of confidence in Hunter, they went to Tuesday's meeting armed with a motion of censure about the company's press release.
They lost on the 8-6 vote, with Hunter and his two management colleagues voting not to censure management. Hunter then recommended that a committee be appointed to study the three sensitive issues and report back in January.
Directors appointed by President Carter will have two members on the new committee and management or stockholder directors will have four - the same ratio as in the vote to censure.
Reportedly, HUD staff members now have launched a study of all options available to end what amounts to a continuing impasse, which government sources said is "not good" for the government or FNMA.
The Senate Banking Committee, which earlier postponed for six months consideration of the legislation to add four government-appointed directors to FNMA's board, is expected to send a lengthy questionnaire to the company in the near future - seeking data on urban lending and freedom of information problems. New hearings are expected in February.
FNMA's Hunter, in a lengthy statement of his own given to board members on Tuesday, emphasized his view that the current conflict boils down to one issue: Do shareholders have control over the company in which they have invested?
"If they do not, then those who have invested in the stock of FNMA have been deceived and defrauded by our representations to the contrary," he asserted. He added that in his view, directors must act on behalf of actual stockholders' interests and not on their own beliefs.
The conflict between FNMA management and Secretary Harris, said Hunter, "Really revolves around the interpretation of the extent of the regulatory authority of the secretary over FNMA." It is not an issue of personalities, he continued, in an apparent reference to speculation that the administration would like to replace Hunter.
What the HUD Secretary is asking "goes far beyond cooperation," Hunter declared. "FNMA is not a political institution, where decisions can be made behind closed doors without risking anything more than defeat at the next election. Yielding to the Secretary is not a decision to be made by 15 people sitting in isolation - we are proxy for 35,000 shareholders . . ."
According to Hunter, three specific FNMA programs currently are delayed pending HUD review:
A program submitted in March to create a market for mortgages on conventionally financed apartments.
Another program, submitted in June, for the purchase of conventional mortgages on two-to-four family structures - designed mainly for large cities. HUD has asked for changes, some of which would increase FNMA's risk, Hunter claimed.
A September proposal for a $200 million investment in conventional loan packages for urban areas.
HUD, meanwhile, has complained that Hunter's management has not been fully responsive to the department's request for information on what might happen if FNMA sell some of its mortgages.
Some mortgage bankers have complained that by only buying mortgages to free up funds during periods of tight money and by not selling mortgages during periods when other money is available, FNMA has distorted the overall mortgage money markets.
Officers of FNMA, including Hunter, declined to comment on reports of what happened at Tuesday's meeting.
But a leading Wall Street analyst and FNMA investor, Elliot Schneider of Gruntal & Co., said yesterday the censure motion amounts to "a very serious charge" that management is lying.