Fannie Mae's estimated $10.8 billion earnings restatement may only require a "small" increase following a report of new accounting errors...

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Fannie Mae’s estimated $10.8 billion earnings restatement may only require a “small” increase following a report of new accounting errors, said analysts at firms including JPMorgan Securities and Morgan Stanley.

Fannie Mae, which is the largest source of money for the mortgage market, misused tax credits, hid losses through so-called finite insurance policies, and understated credit losses, Dow Jones reported Wednesday, citing people “close to, or who have been involved” in a company probe it didn’t identify.

Shares of Fannie Mae, which tumbled 11 percent Wednesday, the most since the stock-market crash, recouped about two-thirds of their losses.

“It is not clear that the issues raised in the Dow Jones report would be material financially,” Kenneth Posner, an analyst at Morgan Stanley in New York, said in a research report yesterday. He rates the company’s shares “equal weight/attractive.” He did not return a call for comment.

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The use of finite insurance to manage credit losses and “questionable” tax credits are “likely to have a relatively small impact on the restatement,” George Sacco, an analyst at JPMorgan, said in a research report. “The impact of these new issues was likely around $1 billion.”

Sacco rates Fannie Mae “overweight,” a view he has held since at least May. He declined to comment.

Fannie Mae shares rose $3.18 to $44.89 yesterday.

Fannie Mae shares have declined 37 percent this year as investors await a restatement dating to 2001. Accounting mistakes cost Chief Executive Franklin Raines and Chief Financial Officer Timothy Howard their jobs and prompted calls in Congress for stronger federal regulation.

“It wouldn’t surprise us if they discovered more than what has been thus far disclosed by management” to explain the rationale for a $10.8 billion restatement, said Robert Lacoursiere, an analyst in New York at Banc of America Securities. “It is just impossible for us to know what the scope of it would be.”

Fannie Mae investigators may need until January to complete a report on as much as $10.8 billion in bookkeeping errors at the government-chartered mortgage-finance company, said Warren Rudman, who is heading the internal probe.

“We are looking at all the accounting issues we have looked at all along, and at this point, we don’t have any conclusions,” Rudman, a former U.S. senator, said Wednesday. “We are still hoping to wrap up the investigation by the end of December, and if we don’t make it we’ll do it in January.”