December 6 2006: 10:26 PM EST

WASHINGTON (Reuters) -- Fannie Mae said Wednesday it overstated earnings by $6.3 billion from 2001 to mid-2004, a much lower figure than expected that closes a chapter in one of the nation's largest accounting scandals.

Fannie Mae (Charts), the nation's largest mortgage-finance company, had earlier estimated that it would reduce earnings by $10.8 billion.

"The restatement and results we filed today mark a critical milestone in Fannie Mae's progress toward building a stronger, better company," Chief Executive Officer Daniel Mudd said in a statement.

In a filing with the Securities and Exchange Commission, Fannie Mae also said that its board had approved an increase in the company's quarterly common stock dividend to 40 cents a share, effective this quarter.

"The dividend boost is the first indication that the clouds are beginning to lift for Fannie Mae" said Marshall Front, chairman of Chicago-based Front Barnett Associates, which owns Fannie Mae shares.

"This should give investors some confidence," Front said, since the board and regulator must expect Fannie Mae to produce earnings to support the larger payout. Because of the scandal, regulators have required Fannie Mae to keep a large cash cushion.
 

Source: http://money.cnn.com/2006/12/06/news/companies/bc.usa.fanniemae.reut/index.htm