Fannie Mae’s chief executive officer, Franklin Raines, was ousted after the Securities and Exchange Commission said the company broke accounting rules, ending his six-year tenure as head of the largest American mortgage finance company, Market News reported.

The 55-year-old, Harvard-educated Rhodes scholar and former budget director under President Clinton, will be replaced by the current vice chairman and chief operating officer, Daniel H. Mudd, Market News said, citing a person it didn’t identify. Stephen B. Ashley, a member of the Washington-based company’s board and past president of the Mortgage Bankers Association, will take over as chairman from Mr. Raines, Market News said.

Mr. Raines had lost the confidence of many investors after 18 months of assurances that the government-chartered company’s accounting was sound. His resignation may remove an obstacle to efforts in Congress to create a stronger regulator for the company and Freddie Mac, which together control about half the $7.6 trillion mortgage market.

The board also accepted the resignation of Fannie Mae’s chief financial officer, J. Timothy Howard, Market News said. The company’s regulator was expected to say that the company is “significantly undercapitalized,” Dow Jones and Reuters said, citing people familiar with the situation they didn’t identify. Chuck Greener and Janice Daue, Fannie Mae spokespersons, weren’t available to comment.

SEC Chief Accountant Donald Nicolaisen said on December 15 that he advised Fannie Mae executives they should fix their accounting for derivatives. Derivatives are financial contracts whose value is derived from debt, equity securities, currencies, and commodities.

Fannie Mae’s regulator, the Office of Federal Housing Enterprise Oversight, alleged in September that the company made bookkeeping errors, a charge that Mr. Raines denied under oath to Congress in October. Mr. Raines then asked the SEC to make a ruling.

If “after a thorough review of all the facts it is determined that our company made significant mistakes, our board and our shareholders will hold me accountable and I’ll hold myself accountable,” Mr. Raines told Congress. “That comes with being a CEO. I accepted the burden on the day I took the job, and I accept it today.”

Fannie Mae estimated in November that it would have a cumulative $9 billion after-tax loss for the last three years if the SEC ruled that it would have to fix its accounting.

“Given the unbelievable statements Fannie executives made at our last hearing, this action was entirely necessary,” Rep. Richard Baker of Louisiana, the third-highest ranking Republican on the House Financial Services Committee, said in a statement yesterday.

Shares of Fannie Mae are up 11% to $70.35 from the 52-week low of $63.40 on September 30.

Mr. Mudd is a director of the company and one of four members of the office of the chairman. Prior to joining Fannie Mae, he was president and chief executive officer of GE Capital, Japan, General Electric’s largest operation outside of America, according to Fannie Mae’s Web site.

He managed GE Capital Asia-Pacific from 1996 to 1999 and ran that business through the Asian financial crisis.

Mr. Raines became CEO on January 1, 1999, taking over from James Johnson, who led the search for Democratic presidential nominee John Kerry’s vice presidential running mate. Mr. Raines earned $20 million last year in base salary, bonus, stock grants, and long-term incentive payments, an 8% increase from 2002.

The company makes money on the difference between its cost of capital and the returns on the mortgages they buy from banks and their other mortgage investments. The company is the second-largest debtor in America behind the government.

Fannie Mae’s earnings have grown at an average annual rate of 18% under Mr. Raines. The performance was fueled by an American housing boom that lifted home prices 36% since 1995, according to the Federal Reserve

Bank of New York. The company’s assets rose to $1.01 trillion in 2003 from $575.17 billion in 1999, eclipsing the combined total of Bank of New York, Wachovia, and Wells Fargo & Company During that time, U.S. homeownership climbed to a record high of 68%, according to the Department of Housing and Urban Development.

Testifying in 2002 about the collapse of Enron Corporation, Mr. Raines told lawmakers: “It is wholly irresponsible and unacceptable for corporate leaders to say they did not know – or suggest it is not their duty to know – about the operations and activities of their company, particularly when it comes to risks that threaten the fundamental viability of their company.”

Mr. Raines was part of a group of executives including Pfizer’s chief executive, Hank McKinnell, who this year created an institute for corporate ethics at the University of Virginia.

In 2003, the smaller Freddie Mac ousted its three top executives, including its chief executive, Leland Brendsel, after it uncovered accounting errors that caused it to restate earnings by about $5 billion.