Former Fannie Mae CEO and two other former executives will pay $31 million under a settlement announced Friday to resolve claims they manipulated earnings to boost their own bonuses.

Franklin Raines, former Fannie chief financial officer Timothy Howard and former controller Leanne Spencer were accused in a civil lawsuit in December 2006 with manipulating earnings over a six-year period at the company.

The $31 million settlement is far less than the more than $200 million that regulators had originally sought when they brought the administrative action in late 2006.

Raines, who was President Clinton's budget director, has agreed to pay $24.7 million, including a $2 million fine to the government and relinquishing of company stock options valued at $15.6 million, the Office of Federal Housing Enterprise Oversight, or OFHEO, announced.

OFHEO is the agency that oversees Fannie Mae and Freddie Mac, the two biggest government-sponsored mortgage finance companies.

The stock options were issued with strike prices between $77 and $81, but company's stock is now trading below $29, making the options worthless.

Raines will also donate proceeds from the sale of Fannie Mae stock valued at $1.8 million. Meanwhile, Howard will pay $6.4 million and Spencer $275,000.

OFHEO's 2006 charges included earnings mismanagement, failure to ensure adequate internal controls and the release of misleading financial reports.

OFHEO's mission is to ensure that (Fannie and Freddie) the Enterprises operate in a safe and sound manner, said OFHEO Director James Lockhart said in a press release.

That cannot occur without corporate management providing prudent and responsible leadership and setting the appropriate ethical and overall 'tone at the top'.

Those options were issued with strike prices between $77 and $81, but the company's stock now trades under $29, effectively making the options worthless, a source familiar with the case said.

Earlier in 2003, Freddie Mac paid a $125 million settlement to OFHEO in 2003 and paid a $50 million settlement last year to the SEC.