The forced departure of Franklin Raines as chief executive of Fannie Mae hardly ends the turmoil at the nation's second-largest financial institution. Civil, criminal and congressional...

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WASHINGTON — The forced departure of Franklin Raines as chief executive of Fannie Mae hardly ends the turmoil at the nation’s second-largest financial institution.

Civil, criminal and congressional investigations are under way as the mortgage giant’s interim managers begin what could be a lengthy process of cleaning up the books and re-establishing credibility.

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But in good news for consumers, analysts said yesterday they did not believe Fannie Mae’s troubles would disrupt the nation’s $8 trillion mortgage market. Fannie accounts for about one-fourth of that market.

“The impact on the average homebuyer will be imperceptible,” said Mark Zandi, chief economist at Economy.com. “The mortgage market is very deep, large and liquid, with many global participants who will fill any void created by a less aggressive Fannie Mae.”

Fannie Mae’s board announced Tuesday the departures of Seattle native Raines and Chief Financial Officer Timothy Howard.

The Office of Federal Housing Enterprise Oversight (OFHEO) — the company’s chief regulator — pressured the board to act after the Securities and Exchange Commission disclosed the company must make accounting corrections that could erase $9 billion of past profit going back to 2001.

On an interim basis, Raines will be replaced by Daniel Mudd, the company’s chief operating officer, while Robert Levin will serve as interim chief financial officer as Fannie Mae works with an outside search firm to find permanent replacements.

The new executives face a daunting task of dealing with OFHEO’s continuing investigation of its accounting practices as well as a civil investigation by the SEC and a criminal probe by the Justice Department. Shareholder suits have also been filed.

Yesterday, Fannie Mae formally notified the SEC its previously filed financial statements for the period from January 2001 through the second quarter of this year “should no longer be relied upon, because such financial statements were prepared applying accounting principles that did not comply with generally accepted accounting principles.”

Fannie Mae previously had estimated a restatement of earnings could reduce profits by $9 billion — about one-third — during the period in question. The company told the SEC in yesterday’s filing that it planned to “comply fully” with the SEC’s determination that it had misstated its earnings and would restate its financial results dating to 2001.

Wall Street reacted with relief yesterday to the management shakeup, pushing Fannie Mae’s stock price up by as much as $3.46 from Tuesday’s close. However, it gave back over half of those gains on profit taking, finishing the day at $71.92, a gain of $1.57.

The company’s stock hit a 52-week low of $62.95 in September after the revelations about the extent of the accounting problems.

Analysts cautioned against thinking yesterday’s rally meant investors’ concerns had been dealt with.

“The problem is that nobody is sure what is still lying in the weeds,” said David Wyss, chief economist at Standard & Poor’s.

Finding out if there are still other accounting issues could take some time, with some analysts predicting Fannie Mae’s books may not be fully corrected for two years.

Freddie Mac, Fannie Mae’s smaller brother in housing finance, is still sorting through its own accounting scandal after disclosing in 2003 it had misstated earnings by $5 billion.

Congressional critics vowed yesterday to renew efforts for tighter controls.

“I cannot imagine any circumstances that would make a more dramatic change in the opinions of members of Congress than these circumstances,” said Rep. Richard Baker, R-La., chairman of the House Financial Services subcommittee that oversees the institutions.

Baker estimated Fannie Mae had paid out bonuses totaling $245 million since 2001. He urged OFHEO to “take action to recapture all bonus payments from executives that were awarded based upon the faulty and deeply flawed earnings statements.”