twitter linkedin
facebook google+

Mortgage News

News by Subject
Complete list of specialty news sections.

Purchase Subscription
Subscribe to and get immediate access to all news, statistics and archives.

Mortgage Advertising
Reach mortgage executives, loan originators and other people tied to mortgage industry.

Consumer Mortgage News
Free mortgage news for prospective borrowers.

Mortgage Newsletter
Free e-mail newsletter with the latest headlines from

Mortgage News Reprints
Put entire stories in your online or printed newsletter or publication.

Mortgage Feedget RSS code
Condensed stories free on your Web site or for your RSS reader.

News Archives
Archive of stories by month going back to 1999.

Press Releases
Reports and announcements from

Mortgage Statistics
Data and statistics for real estate finance.

Mortgage Directories
Directories of lenders, branch operators and mortgage service providers.

Mortgage Graphs
Directories of lenders, branch operators and mortgage service providers.

home subscribe advertise reprints e-mail help RSS about us LOG IN

Mortgage News


Mortgage News

HOT Topics









site map
Mortgage Lawsuits News | Mortgage Litigation Index
Mortgage industry lawsuit news and mortgage litigation coverage. Stories about legal settlements, judgments and mortgage class actions.

SEC Sues Former GSE Executives

Former Fannie, Freddie execs accused of misleading investors about subprime share

Dec. 16, 2011

By staff

The executives who were at the helm of Fannie Mae and Freddie Mac at the time the two secondary lenders collapsed have been named as defendants in a government lawsuit. The defendants, one who is the current chief executive of Fortress Investment Group LLC, are accused of hiding their exposure to higher-risk loans.

During the darkest days of the financial crisis in September 2008, the newly formed Federal Housing Finance Agency seized control of the Federal National Mortgage Association and the Federal Home Loan Mortgage Corp. At the time, Daniel H. Mudd was chief executive officer at Fannie and Richard F. Syron was chairman and CEO of Freddie.

Mudd took over at Fannie in June 2005 after filling in as interim chief upon the departure of Franklin D. Raines in December 2004. Mudd, who along with Syron was terminated when the two firms were placed into conservatorship, has since gone on to become CEO of Fortress Investment Group LLC -- parent of Nationstar Mortgage LLC.

During their tenure at the two government-controlled enterprises, Mudd and Syron misled their respective investors about their companies' levels of higher-risk mortgage holdings, according to two separate federal lawsuits filed in Manhattan. They allegedly misstated their subprime mortgage holdings in public filings, investor calls and media interviews. Fannie is additionally accused of masking the degree of its Alt-A exposure.

The SEC claims the deception at Fannie occurred between 2006 and 2008, while the time frame was between March 2007 and August 2008 at Freddie.

In addition to Mudd, former chief risk officer Enrico Dallavecchia and former executive vice president Thomas A. Lund are named as defendants in the complaint alleging securities fraud at Fannie.

Syron is joined by former Freddie executives Patricia L. Cook and Donald J. Bisenius as defendants in the lawsuit alleging investor fraud at Freddie.

"Fannie Mae and Freddie Mac executives told the world that their subprime exposure was substantially smaller than it really was," Robert Khuzami, director of the SEC's enforcement division, said in a news release Friday.

The SEC alleges that Fannie reported its single-family subprime exposure was only 0,2 percent as of Dec. 31, 2006. That worked out to around $4.8 billion in loans "made to borrowers with weaker credit histories."

But Fannie excluded more than $43 billion in "expanded approval" loans that were "specifically targeted by Fannie Mae towards borrowers with weaker credit histories," the complaint alleges.

In addition, while Fannie reported its Alt-A exposure at 11 percent of its portfolio as of March 31, 2007, the SEC claims that Alt-A actually accounted for 18 of the company's single-family holdings. The disclosure was made with the blessing of Mudd.

Messrs. Mudd, Dallavecchia and Lund were motivated by a desire for bigger market share, the SEC said.

Syron and Cook allegedly led investors to believe that Freddie's single-family business had "basically no subprime exposure."

"Unbeknown to investors, as of Dec. 31, 2006, Freddie Mac's single family business was exposed to approximately $141 billion of loans internally referred to as 'subprime' or 'subprime like,' accounting for 10 percent of the portfolio, and grew to approximately $244 billion, or 14 percent of the portfolio, as of June 30, 2008," the SEC said.

Both Fannie and Freddie entered into a non-prosecution agreement with the SEC. The pair agreed to accept responsibility for their conduct and not dispute, contest, or contradict an agreed-upon statement of facts -- though neither firm admitted or denied liability. The pair will cooperate with the agency in the litigation.

McLean, Va.-based Freddie issued a statement indicating that the SEC will not initiate an enforcement action against it or require it to pay a monetary penalty.

Fannie made a filing with the SEC on Friday that said, "Subject to Fannie Mae's full, truthful and continuing cooperation and compliance by Fannie Mae with its obligations under the agreement, the SEC agreed not to bring any enforcement action or proceeding against Fannie Mae arising from the investigation."

The SEC said it is seeking financial penalties and for the executives to return ill-gotten gains. A permanent injunction is also sought barring the defendants from being an officer or director of a publicly traded company registered under Section 12 of the Securities and Exchange Act of 1934.

"In entering into these agreements, the commission considered the unique circumstances presented by the companies' current status, including the financial support provided to the companies by the U.S. Treasury, the role of the Federal Housing Finance Agency as conservator of each company and the costs that may be imposed on U.S. taxpayers," the SEC said in its statement.

Case No. 11 CIV 9202, Dec. 18, 2011 (U.S. District Court for the Southern District of New York).

Case No. 11 CIV 9201, Dec. 18, 2011 (U.S. District Court for the Southern District of New York).

Fannie Mae profile

Freddie Mac profile

next story

back to current headlines

Nonprime and Subprime News | Subprime Statistics
Stories about non-QM products. Coverage of subprime, Alt-A and
hard money lending. Home-equity loans and home-equity lines of credit.

GSE News | Fannie/Freddie Share Statistics
Fannie, Freddie and FHLB news. Coverage of government sponsored enterprise regulation, operations and litigation.

Corporate Mortgage News
M e r g e r s, a c q u i s i t i o n s and private and public offerings. Other corporate activity including executive appointments, bankruptcies name changes.

Logout forgot

SUBSCRIBERS: Edit Subscription | Subscription Help | or call 214.521.1300

Subscribe Contact Us Site Map

Copyright © 2017 Mortgage Daily, D a l l a s
Subsribers Only:

AMC directory

ARM indexes

mortgage company directory

mortgage regulations

net branch directory

p r i c i n g engine directory

wholesale lender directory

More Mortgage News Resources (full site map):

advertising news

appraisal news

bank news

biggest lenders

commercial mortgage news

corporate mortgage news

credit news

FHA news

financial regulation news

foreclosure news

GSE news

jumbo mortgage news

interest rates

loan modification news

loan originator survey

LOS Newsletter


mortgage associations

mortgage-backed securities

mortgage books

mortgage brokers

mortgage compliance

mortgage conferences

mortgage directories

mortgage education

mortgage employment

mortgage employment index

mortgage executives

mortgage fraud

mortgage fraud blog

mortgage fraud local news

Mortgage Fraud Index

Mortgage Graveyard

mortgage insurance news

mortgage lawsuits

mortgage leads

mortgage lender ranking

mortgage licenses

mortgage litigation

Mortgage Litigation Index

Mortgage Market Index

mortgage mergers

mortgage news

mortgage politics

mortgage press releases

mortgage production

mortgage public relations

mortgage rates

mortgage servicing

mortgage statistics

mortgage technology

mortgage video

mortgage Webinars

net branch

net branch directory

nonprime news

origination news

originator tools

real estate news

refinance news

reverse mortgage news

secondary marketing

social media

servicing news

subprime news

wholesale lenders