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SEC Sues Former Fannie & Freddie Execs Over Subprime Loans

Source: WSJ - Chad Bray

Posted on 16 Dec 2011

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The Securities and Exchange Commission sued several former executives of Fannie Mae and Freddie Mac, including their former chief executives, alleging they misrepresented to investors their exposure to subprime mortgage loans.

The lawsuits, filed in Manhattan federal court, alleged senior executives at Federal Home Loan Mortgage Corp., or Freddie Mac, and Federal National

Mortgage Association, or Fannie Mae, made false and misleading statements about their exposure. The executives include former Freddie Mac Chief Executive Richard F. Syron and former Fannie Mae CEO Daniel H. Mudd.

The SEC alleged that the Fannie Mae executives misled the public about the government-sponsored firm's exposure to subprime mortgages and so-called Alt-A loans between December 2006 and August 2008. Freddie Mac executives allegedly did the same regarding its exposure to subprime loans between March 2007 and August 2008.

Fannie and Freddie reached civil nonprosecution pacts with the SEC under which they agree to accept responsibility for their conduct, but did not admit or deny wrongdoing. Fannie and Freddie also agreed to cooperate in the SEC's litigation against the former executives.

The SEC sent Wells notices, indicating it planned to pursure enforcement actions, to Mr. Syron, Mr. Mudd and other executives earlier this year.
Lawyers for Mr. Syron and Mr. Mudd couldn't immediately be reached for comment Frid