Fannie Mae , the largest provider of U.S. residential mortgage funding, on Monday named Michael Williams, an 18-year veteran of the government-controlled company, as president and chief executive officer.

Williams, most recently the company's chief operating officer and previously with KPMG Peat Marwick and DuPont Company, succeeds Herbert Allison. Allison has been nominated as assistant secretary for financial stability and counselor to the secretary at the Treasury Department.

Appointing an insider chief executive may be a move to enhance perceptions of stability at the company, whose importance to the U.S. housing market has grown as the credit crunch has lingered, analysts said. The abrupt exit of David Moffett from rival Freddie Mac in March after just six months on the job put a spotlight on the uncertain futures of the companies and increased concern about a drain of talent.

Fannie Mae and Freddie Mac have also been hit by a steady exit of other executives since September, when concerns of capital shortfalls led the government to seize the companies and place them in conservatorships.

Internally, the team at Fannie Mae would view it as very positive that someone from their shop was viewed with enough confidence to run the company, S.A. Ibrahim, chief executive officer of mortgage insurer Radian Group Inc., told Reuters at the meeting of the Mortgage Bankers Association in Chicago.

As COO, Williams oversaw the restructuring of Fannie's foreclosure prevention and loss mitigation programs. He also led efforts to carry out the administration's Making Home Affordable loan refinance and modification efforts, the Washington-based company said in a statement.

Williams was also involved in the company's financial restatement, reorganization and transition to conservatorship, Fannie Mae said.

He's a known entity, said John Courson, chief executive officer of the MBA. He already knows the background of Fannie Mae in his many roles, and clearly has the confidence of employees and mortgage lenders, he added.

James Lockhart, director of the company's regulator, the Federal Housing Finance Agency, noted Williams was also instrumental in extricating the company from an accounting crisis that caused a multi-billion dollar restatement and ousters of executives.

(Reporting by Lynn Adler and Al Yoon; Editing by Dan Grebler)