Former Fannie and Freddie CEOs Sued by SEC
Apply for a Loan
Secured with SHA-256 Encryption
UPDATED: Dec 16, 2011
Advertiser Disclosure: We strive to help you make confident loan decisions. Comparison shopping should be easy. We are not affiliated with any one loan provider and cannot guarantee quotes from any single provider. Our partnerships don’t influence our content. Our opinions are our own. To compare quotes from many different companies please enter your ZIP code on this page to use the free quote tool. The more quotes you compare, the more chances to save.
Editorial Guidelines: We are a free online resource for anyone interested in learning more about loans. Our goal is to be an objective, third-party resource for everything loan related. We update our site regularly, and all content is reviewed by experts.
Today, top officials with Fannie Mae and Freddie Mac have been charged by the U.S. Securities and Exchanges Commission (SEC) for allegedly knowing and approving of misleading statements of higher-risk mortgages and subprime mortgage loans.
Three former Fannie Mae executives, including former CEO Daniel H. Mudd, and three former Freddie Mac executives, including Chairman and CEO Richard F. Syron, were charged by the SEC for securities fraud.
“Fannie Mae and Freddie Mac executives told the world that their subprime exposure was substantially smaller than it really was,” said Robert Khuzami, Director of the SEC’s Enforcement Division, in an SEC press release. “These material misstatements occurred during a time of acute investor interest in financial institutions’ exposure to subprime loans, and misled the market about the amount of risk on the company’s books.”
Honing his sights specifically on the top officials targeted by the SEC, Khuzami said, “All individuals, regardless of their rank or position, will be held accountable for perpetuating half-truths or misrepresentations about matters materially important to the interest of our country’s investors.”
Both Fannie Mae and Freddie Mac have entered into a non-prosecution agreement, in which they agree to accept responsibility for its conduct while not admitting to or denying liability.
The lawsuits filed against the two mortgage firms seek financial penalties and permanent injunctive relief, prohibiting the accused executives from obtaining an officer or director position with another company.
“The government reviewed and approved the company’s disclosures during my tenure and through the present,” said Mudd today in a statement according to a Bloomberg article. “Now it appears that the government has negotiated a deal to hold the government, and government-appointed executives who have signed the same disclosures since my departure, blameless—so that it can sue individuals it fired years ago”
Mudd, who was relieved of his position at Fannie Mae when the two mortgage firms were seized by regulators in 2008 holds firm that the federal government and investors were aware of “every piece of material held by Fannie Mae.”
The SEC’s accusations come after a deluge of criticism fell on the SEC for not holding the individual responsible for illegal and unethical conduct that contributed to the subprime home loan and housing crisis.
But as Paul Krugman, economist and New York Times columnist, said in a 2008 article, “Fannie and Freddie had nothing to do with the explosion of high-risk lending a few years ago, an explosion that dwarfed the S.&L. fiasco. In fact, Fannie and Freddie, after growing rapidly in the 1990s, largely faded from the scene during the height of the housing bubble.”
Fannie Mae and Freddie Mac back millions of mortgage loans, and continue to originate and purchase home loans every day. The two organizations received an enormous bailout from U.S. taxpayers after the housing crisis and Fannie Mae just requested of the public another bailout last month.