The chartered mortgage guarantors known as Fannie Mae announced yesterday that its overseer has discovered irregular accounting practices, raising “doubts” about the accuracy of its reported earnings.

The Office of Housing Enterprise Oversight delivered an explosive report on Monday to Fannie Mae’s board of directors Monday. News of the report, which in part accused the company of “cookie jar” accounting, hit Fannie Mae’s widely held stock hard, sending it down $4.96, or 6.5%, to $70.69 – its sharpest one-day drop in more than two years.

A spokeswoman for the oversight office, Corinne Russell, did not return a call seeking comment. Ofheo, as the office is known in the financial community, did not announce a date for the report’s public release.

In February, Fannie’s smaller rival, Freddie Mac, announced that it had hidden more than $5 billion in earnings. That was done in an attempt to smooth out its net income, making Freddie Mac more appealing to investors and equity analysts seeking predictable earnings growth and feeling wary about the company’s sensitivity to interest-rate fluctuations. The company paid a $125 million fine and dismissed many top officers, including its chairman, vice chairman, and chief financial officer.

The report to Fannie Mae’s board detailed five separate problems within the company’s financial accounting and supervisory functions. In a statement released yesterday, the presiding director of Fannie’s board of directors, Anne Korologos, addressing the most serious of the charges, said Ofheo reported that the company’s massive derivatives and hedging operation did not have “accounting methods and practices” that complied with generally accepted accounting principles, or GAAP for short.

Since Fannie Mae started reporting the notional value of its derivatives contracts two years ago, the company has stated at least $1.3 trillion worth of contracts outstanding. Several Wall Street dealer analysts, speaking on condition of anonymity given restrictions on commenting on their clients, put the company’s derivatives exposure at between $1.5 trillion and $2 trillion.

“The management team at Fannie Mae strongly supports the leadership shown by the non-management members of our Board of Directors in responding to the Ofheo report and SEC inquiry. We will assist them in any way we can as they carry out their duties,” the chairman and CEO of Fannie Mae, Franklin Raines, said in a prepared statement.

A ratings agency analyst sounded a more cautionary note. Fannie Mae “has traditionally been a ‘trust’ company, as in ‘you have to trust them,’ since they have been very wary of transparency, especially in their massive derivatives book,” the president of Egan-Jones Ratings Co., Sean Egan, said. “You’ve had no way of really assessing their real exposure to both rates and weak counterparties.”

The statement by Ms. Korologos, the Fannie board leader, said Ofheo listed Fannie’s “tolerance of internal accounting control deficiencies,” and its improper “cookie jar” accounting reserves with respect to accounting for price adjustments of securities.

The statement also reported Ofheo allegations that “in at least one instance,” Fannie Mae “deferred expenses to hit bonus compensation targets,” and that the company fostered “a corporate culture that emphasized stable earnings at the expense of accurate financial disclosures.”

Both Fannie and Freddie have aggressively publicized their track record of stable growth in revenues and earnings, and accordingly have usually been awarded sharply higher stock prices, on the view that the companies’ earnings are more predictable than those of other companies with massive bond exposure, such as Merrill Lynch or AIG.

Egan-Jones’s Mr. Egan has been among the few analysts willing to be publicly skeptical of Fannie’s story of growth and adequate risk control. He rates the company a single-A, four notches below the triple-A of both Standard & Poor’s and Moody’s Investors Service, the two largest ratings companies.

Mr. Egan cited the company’s unusually low debt-to-equity ratio as a reason for the difference of opinion. Fannie’s August 30 10-Q quarterly filing reported debt of $963 billion, compared to an equity level of $36 billion. “Most single-A financial companies have 8% so I’m being generous,” he said.

Mr. Egan, whose firm gained both plaudits and scorn for being the first debt analysts to point out deteriorating financial conditions at WorldCom and Enron, said the next big problem for Fannie Mae will be its valuation of many of the more esoteric and less liquid securities in its $891 billion portfolio.

In May, Ofheo forced Fannie to restate $278 million in earnings for the second quarter, as it raised objections over how Fannie valued losses in its portfolio of mobile homes.

One Wall Street bond analyst said the regulator’s report “could not possibly have come at a worse time for Fannie,” as the company is engaged in intense lobbying with both regulators and Congress over the prospect of being regulated by the Department of the Treasury.

Fannie Mae, chartered in the 1940s by Congress to purchase residential mortgage loans from banks and thrifts, was instrumental in creating the $3.1 trillion secondary market in mortgage backed securities. In conjunction with Freddie Mac, the government-sponsored enterprise guarantees the principal and interest payments of $3.5 trillion of the $7.3 trillion American mortgage market.