Former Fannie Mae boss Franklin Raines and two other former executives have agreed to pay $31.4m (£15.7m) to settle allegations of a 2004 accounting fraud.

US regulators had accused the three of manipulating the books for six years in order to meet profit and bonus targets.

Mr Raines, who worked in the Clinton administration, will pay the lion’s share - $24.7m - but denied wrongdoing.

The settlements end more than a year of fighting over who was responsible for inflating earnings by $6.3bn.

Former chief financial officer Timothy Howard agreed to pay $6.4m and ex-controller Leanne Spencer was fined $275,000.

The penalties were much less than the $215m sought by the government regulator for the mortgage market, the Office of Federal Housing Enterprise Oversight.

It is thought the payments will be largely covered by insurance and forfeiture of stock options.

The multi-billion dollar accounting scandal at Fannie Mae, which finances or guarantees one of every five home loans in the United States, left Wall Street reeling and its capital requirements were until recently restricted as a result.

These were recently relaxed to enable the government-backed company to provide more support to the distressed US housing and mortgage markets.