WASHINGTON (AP) – Under pressure from federal regulators, Fannie Mae’s board has agreed to take sweeping action to correct what were cited as serious accounting problems.

Fannie Mae agreed to boost the mortgage giant’s capital, recalculate key transactions back to 2001 and tighten internal controls.

The government-chartered mortgage financer and its regulator said Monday they had reached an agreement after negotiations last week and over the weekend.

A week ago, the Office of Federal Housing Enterprise Oversight told Fannie Mae that its eight-month-old investigation had found pervasive earnings manipulation to meet Wall Street expectations and serious accounting misdeeds. It ordered “immediate remedial action.”

“This agreement is an important step toward resolving these concerns and helping to assure safe and sound operations,” OFHEO Director Armando Falcon said in a statement Monday.

A Treasury official, meanwhile, renewed the Bush administration’s call for tighter government reins over Fannie Mae and Freddie Mac, the other huge government-sponsored mortgage company, which faced an accounting crisis 15 months ago.

“We think the legislation needs to be re-enacted, and the sooner the better,” Wayne Abernathy, the assistant Treasury secretary for financial institutions, told reporters. He said action by lawmakers might even be possible in the few remaining weeks before Congress adjourns. Key Republican senators and House members also have urged such a measure.

The housing oversight regulators last week raised the possibility of removing top management of Fannie Mae, the biggest financer of home mortgages in the country and the second-largest U.S. financial institution after Citigroup Inc. That’s still possible.

The revelations pushed down Fannie Mae’s stock more than 13 percent, to a 52-week low, in a three-day slide last week. The shares rose 53 cents to $66.04 in Monday trading on the New York Stock Exchange.

Neither the regulators nor the company said whether Fannie Mae would have to restate its earnings. Freddie Mac wound up having to restate $4.5 billion in earnings for 2000-2002.

Under the agreement, Fannie Mae will increase, within the next nine months, its cushion of reserve capital, needed in case future problems arise, by about $5 billion.

To raise that money, Fannie Mae has several options. It could issue new stock, a move that could further weaken its share price; sell assets from its portfolio of investments, which includes billions in mortgages plus items such as aircraft leases; or even scale back its purchase of home mortgages, which could reduce the supply of home loans for prospective buyers.

The company also agreed to recalculate all its transactions for derivatives, financial instruments it uses to hedge against interest-rate and other risk, for all quarters going back to 2001.

Morgan Stanley and Prudential Equity Group swiftly downgraded their rating of Fannie Mae stock Monday. “We believe that the requirement to carry extra capital could slow (Fannie Mae’s) growth over the near- to intermediate term,” Prudential analyst Bradley Ball said in a research note.

In addition, Ball wrote, requiring the company to recalculate its accounting “will at a minimum create uncertainty and confusion surrounding (Fannie Mae’s) past and prospective future results.”

Fannie Mae and Freddie Mac pump money into the home mortgage market by buying billions of dollars of home loans each year from banks and other lenders, then bundling them into securities that are resold to investors. Their stock and debt – Fannie Mae’s is at nearly $1 trillion – are widely held by investors in the United States and around the globe.

The Securities and Exchange Commission also is investigating the company’s accounting.