SEC Considers Fannie and Freddie Charges
The US Securities and Exchange Commission is reportedly considering filing chargers against a number of former and current executives of mortgage giants Fannie Mae and Freddie Mac with violations related to the recent financial crisis. The move would set up a battle between the SEC and the housing regulator charged with overseeing the tow government-controlled entities.
The SEC, whose function is to enforce the nation’s securities laws, claims that at least four senior executives at the two firms failed to provide sufficient information to investors about the companies’ mortgage assets as the nation’s housing market collapsed. But the Federal Housing Finance Agency, the agency charged with regulating the two companies since they were seixed by the government in 2008, disagrees with that assessment.
FHFA officials argue that financial disclosures from the two entities were sufficient, and the agency has sent a letter to the SEC opposing the filing of any charges. Over the last couple of months, SEC officials have sent a series of letters to the executives in question saying that they could face civil charges, though the agency has not yet made a final decision to file them.
The SEC has alleged that executives at Fannie and Freddie misled investors about the potential risk involved with certain mortgage products such as subprime loans. Executives that could face charges reportedly include Fannie chief Daniel Mudd, former Freddie head Richard Syron, former Freddie CFO Anthony Piszel, and current Freddie staffer Donald Bisenius, who recently announced his intention to resign after receiving his notice.
The main allegation against Fannie executives is that they mis-classified certain risky loans as “prime”, while the Freddie staffers allegedly failed to warn investors of potential risks involved with subprime loans.