Former Fannie, Freddie Execs Face Fraud Charges

December 19, 2011

The Securities and Exchange Commission is accusing six former Fannie Mae and Freddie Mac executives, including ex-CEOs, of misrepresenting their holdings of high-risk mortgage loans in the GSEs' portfolios.

"Fannie Mae and Freddie Mac executives told the world that their subprime exposure was substantially smaller than it really was," Robert Khuzami, SEC enforcement chief, said in a statement. "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."

The SEC lawsuit claims the executives “downplayed the size of their holdings of subprime loans and falsely claimed that their risky investments were minimal and manageable,” according to a CNNMoney news report. 

The former Freddie Mac executives charged are Chief Executive Officer Daniel Mudd; Enrico Dallavecchia, chief risk officer; and Thomas Lund, the executive vice president of single-family mortgage business. The former Fannie Mae executives charged are CEO Richard Syron; Patricia Cook, executive vice president and chief business officer; and Donald Bisenius, executive vice president for the single family guarantee business.

Mudd called the charges false. "Every piece of material data about loans held by Fannie Mae was known to the United States government and to the investing public," he said in a statement. 

Other executives charged also released statements calling the SEC charges “meritless” and saying that disclosures were made and not misleading. 

Source: “SEC Charges Six Former Execs of Fannie, Freddie,” CNNMoney (Dec. 16, 2011)