WASHINGTON (MarketWatch) -- Fannie Mae (FNM) said Thursday it has agreed to suspend its acquisition, development, and construction lending program because of concerns raised by its safety and soundness regulator, the Office of Federal Housing Enterprise Oversight.

"We will be working closely with OFHEO to work through our current pipeline and issues related to risk management reporting, policies and procedures and oversight of the program," Fannie Mae said.

The mortgage finance giant is recovering from a $10.6 billion accounting scandal and recently paid a $400 million fine to federal regulators because of its internal lapses.

In a press release, Fannie Mae said the suspended program represented "less than one-tenth of one percent of the company's overall book of business (approximately $1.7 billion), and we do not anticipate that this action will have a significant impact on the company."

On June 22, two Republicans in the House of Representatives sent a letter to OFHEO Director James B. Lockhart raising concerns about the Fannie Mae program.

"This ADC venture may be even more problematic than under routine circumstances because Fannie Mae may be seeking to exploit a 'window of opportunity' caused not only by Congressional deliberations over a new regulator, but also because of its ability to launch a new business without clear market disclosures of the costs of entry or the resulting profitability - or lack thereof," wrote Reps. Jeb Hensarling of Texas and Ed Royce of California.

In an interview Wednesday with Dow Jones Newswires, Lockhart said regulators should keep a close watch on new business lines at Fannie Mae and Freddie Mac while the government-sponsored enterprises recover from separate accounting scandals.

"My view really is, some of the people there are still more of the idea that 'We should be out creating all sorts of new products, increasing our portfolios dramatically,'" he said. "We know that they don't have the capability to do that. To me, that's a little arrogance."

Lockhart did not mention, though, any details of the recent agreement with Fannie Mae.

In January, Fannie Mae Chief Executive Daniel Mudd gave a speech to the National Association of Home Builders in which he outlined the mortgage giant's plan to make $10 billion of home construction loans over 10 years. Fannie actually began the venture in 2003, but it drew fresh criticism at the time of Mudd's speech from Fannie's critics.

Fannie Mae's agreement to suspend the program was first reported by National Mortgage News.

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