SEC Nears Settlement With Fannie Mae, Freddie Mac Over Subprime Loans

Regulators are close to an agreement with Fannie Mae and Freddie Mac to settle a case over disclosing their exposure to risky subprime loans, The New York Times reported on Thursday.

Neither a monetary penalty nor an admission fraud would be included in the settlement under the proposed agreement with the Securities and Exchange Commission, the Times reported, citing several people briefed on the case.

The SEC abandoned hopes of assessing a fine because of the precarious financial positions of the two companies, the newspaper said, citing sources who spoke on condition of anonymity because the deal was not yet final.

The two companies did not view the government's case as particularly strong, but they said they moved to settle to spare time and resources, the Times said, citing one person close to the talks.

The negotiations have been going on since at least early summer, and a deal may not come until later this year, the newspaper said, citing its sources.

Fannie Mae, Freddie Mac and the SEC all declined to comment, the report said.

A settlement would represent the most significant acknowledgment yet by the mortgage finance giants that they played a central role in the housing boom and bust, the New York Times said.

(Reporting by JoAnne Allen; editing by Ramya Venugopal)

Copyright 2011 Thomson Reuters. Click for Restrictions.

Comments

[Bob Duryea]

01:17 AM on 10/13/2011

FHA lenders quickly dumped toxic sub-prime mortgages onto other companies to prevent another TARP II. The Investors' over-inflated appraised values of homes created billions in profits for brokers, and their financial institutions. The higher the interest rate , even using " Bait & Switch techniques, the broker made higher closing commissions, the underwriters secured higher yields for investors. As appraised values kept rising so did the profits. Until word leaked out that housing was going to take a hit then FHA lenders sold repeatedly to Non-fha lenders were so graciously given the "option" to become a part of HAMP, with TARP funds put aside for hamp , but was marginally used. Why? To protect Wall Street. Because lenders knew they had to protect the investors first on over-inflated...now toxic bundled mortgage securities. To become involved in HAMP the lender would have to adjust the principal to a truer value ( Falsely-over appraised home values) and thus the investor would lose out on their investted securities. Everyone is pointing the finger at others, as banks are suing each other , traders, etc., yet in the profiteering phase... loans were sold repeatedly with assistance of robo-signing, MERS, and totally lack of monitoring exactly what lenders were doing in dumping these toxic assets to another bank. Until it was too late.

[mellojack2]

11:44 PM on 09/10/2011

Mortgage Database Proprietary Files:

“Freddie Mac is the compliance agent for non-HAMP servicing/foreclosures. Non-Hamp means not Freddie/Fannie loan. All the data is considered “proprietary” — by an agreement between Treasury and Freddie in 2010 — all information compiled in a mortgage data-base — that is proprietary and cannot be revealed.
…look for NJ case — In matter of foreclosures — in which Freddie refuses to divulge info to the court because of the Treasury agreement — and that the information in proprietary. “

[mellojack2]

11:18 PM on 09/10/2011

VERY IMPORTANT---BEING COVERED UP:

“…The GSEs could not just sell the Note- on performing loans — this would be securities fraud to the GSE security investors. The Note (and it’s receivable stream) had to be falsely placed in default and charged-off in order to sell the “Note” — but, when this happens the Note no longer exists — thus, all that is sold is collection rights to a once existing note.
Security investors fund the BANK — not the borrowers — there is no direct relationship between security investors and borrowers. If banks are able to sell their income stream, that is an accounting transaction — it is not a “loan” to borrowers. This is why security investors are NEVER the creditor.
Collection rights transfers are not funded by borrower transactions (ie fabricated refinance). Collection rights are transferred by assignment — not NOTES (which is why NOTES are fake)…the credit enhancers pay cash for collection rights — they use insurance for the purchase of the rights. This is why the subprime was so profitable — the bank debt buyers put up no cash for transaction — but, were then able to profit by the “sale” of the receivable pass-throughs to security investors.. This is also why MBIA (insurance co.) legal action against BOA and others is hugely important.”

[Parylinereturns]

06:38 AM on 09/10/2011

The liberals have to eat crow on this one. We won't see many lib posters on this thread.

[chance1946]

03:58 PM on 09/09/2011

This mortgage mess was brought to you by Community Reninvestment Act of 1977 and Chris Dodd and Barney Frank.

[mellojack2]

01:23 PM on 09/09/2011

“. ..Mortgage Loan Purchase Agreement and Mortgage Schedule cannot be proven...
...once all proprietary “records” are finally divulged, subprime refinancing fraud is exposed — game over for those who are still trying to making a buck on the fraud.
…securitization of fraudulent “collection rights” — was a scam from the onset — never MBS — get your heads out of MBS — these “refinances” (not actually refinances) — were “loans” REJECTED from traditional MBS — credit enhancement was created from layers of mezzanine tranches for credit default swaps — (purchase of collection rights) — and were NEVER secured mortgages. This is what caused the financial crisis FALL. Understand that subprime securization was manufactured securitization fraud.
…the direction in courts — has been fraud upon the court — over and over — and, this is finally surfacing. There was no “funding” — PERIOD. —- All that existed was a purchase of collection rights from GSEs — by which “purchase” was covered by insurance for fabricated default and rejects.
…if you want to say that any borrower is responsible for any non-”funded” loan — that fabricated “funded” loan is unsecured — because there was NO VALID MORTGAGE.
…There is NO lender. NO LENDER. NO FUNDING — NO MORTGAGE — Just your good “ole” debt buyer shyster — for unsecured fraudulent collection rights.
Proof?? in the mortgage data base proprietary files.”

[scottishboy]

01:09 PM on 09/09/2011

What a surprise.

[SoDoSomething]

01:07 PM on 09/09/2011

Yes, it would be clever of the SEC to get Fannie and Freddie to take the fall for the SEC's failure to regulate the banks adequately and the rest of Wall Street's greed and malfeasance. The truth is that Fannie and Freddie were late to the sub-prime game and were responsible for a small portion of these loans. Lehman didn't fail because of Fannie or Freddy. The credit markets did not freeze up because of their actions. Fannie and Freddie did not write any of the derivatives that took AIG down. They were not securitizing bad loans and rating them as AAA. Fannie and Freddie's failures were more fallout of all these, not the cause.

[Tim The Enchanter]

12:38 PM on 09/09/2011

Fannie and Freddie deserve the death penalty. As does the Fed and a lot of other government agencies.

[Zapp384]

01:08 PM on 09/09/2011

So does BOA, BNYM, and so on.

[Tim The Enchanter]

02:15 PM on 09/09/2011

That's fine, they should have lived or died on their own. Civilization would live on and it's hard to imagine being worse off than we are. In fact, a whole lot of people might have been able to keep their homes.

[SoDoSomething]

01:09 PM on 09/09/2011

Fannie and Freddie were not government agencies, they were private companies whose stock traded on the NYSE.

[Tim The Enchanter]

01:20 PM on 09/09/2011

So you admit the recession as caused by Democrat fascism?

Thanks.

The FM twins were indirectly run and backed by Congress, creating a "we can do no wrong" attitude. Also, Congress directly regulated them and lowered the standards for their purchases.

[Tim The Enchanter]

02:14 PM on 09/09/2011

Besides, they are called "govenrment sponsored entities" for a reason.

Congress pulled the strings and they did their bidding. In return, they donated a ton of money to Barney and Barack and made sure they weren't regulated out of making a ton of money before they imploded.

[Tim The Enchanter]

12:37 PM on 09/09/2011

"A settlement would represent the most significant acknowledgment yet by the mortgage finance giants that they played a central role in the housing boom and bust, the New York Times said."

It's okay, every "liberal" will deny it until the day they die, and then deny it again.

[demockracy]

12:58 PM on 09/09/2011

The truth is that, as unsavory as Fannie and Freddie have been (and they've been bad), saying they were primarily responsible for the sub-prime meltdown is a lie manufactured by the right, and repeated endlessly, even from such "liberal" media sources as NY Times and Huffpo.

At the peak of the sub-prime frauds, these quasi-governmental agencies owned only 14% of the fraudulent loans, and they got into the business playing catch-up to unregulated, private lenders like Countrywide and IndyMac (it's part of the criminogenic business climate of deregulation that even honest lenders are sucked into imitating their temporarily-more-profitable criminal rivals).

The real criminality is that so few of the private banksters have been prosecuted. (see http://neweconomicperspectives.blogspot.com/2011/08/nprs-robert-siegel-interviews-william-k.html)

Paul Krugman's blog documents the right-wing noise machine's attempts to smear these agencies with the private malfeasance really responsible (and only possible in a climate of deregulation). See these links for details:

http://krugman.blogs.nytimes.com/2011/07/14/fannie-freddie-phooey/
http://krugman.blogs.nytimes.com/2010/09/20/fannie-and-freddie-again/

...so yes, I'll deny it as long as the facts support such a denial, and as long as the likes of Faux News trumpets government responsibility for the housing bubble when it's a lie.

[Tim The Enchanter]

01:05 PM on 09/09/2011

Yeah, even the New York Freaking Times is saying they played a central role in the whole deal.

Keep in mind who was buying Countrywide's mortgages and basically telling them they'll buy anything they make?

Live in denial all you want. See you in 2012.

[cats530]

12:33 PM on 09/09/2011

"Last Friday the U.S. regulator, the Federal Housing Finance Agency (FHFA), which has the oversight responsibility of Fannie Mae and Freddie Mac, sued 17 large banks and financial institutions relating to losses on approximately $200 billion of Fannie Mae and Freddie Mac subprime bonds. Now, let me be clear right from the start. I am no apologist for the banks. And historically my tendency has been to support better financial regulation and even the Democratic Party through my voting preference.However, enough is enough. At this point in time the Government and the FHFA have no right to sue the banking industry on behalf of Fannie Mae and Freddie Mac. That is a joke. When it comes to the financial crisis, Fannie Mae and Freddie Mac were Players (Big Players)—not naïve, innocent victims who were bedazzled by the banks."

http://mandelman.ml-implode.com/2011/09/guest-post-prove-fannie-freddie-innocent-before-suing-the-banks-and-here-is-how/

[Israelibabs]

12:13 PM on 09/09/2011

How does this affect Bachman's mortgage with Freddie Mac?

[WillofthePeople]

11:51 AM on 09/09/2011

Hundreds, if not thousands of people, deserve to be compelled to pay restitution and spend time in the pokey, including the fake regulators, hypocritical prosecutors, and many, many members of Congress, the Senate and Supreme Court judges... for enabling and allowing these financial crimes to occur by bogus or buried legislation or rulings that created the framework for the crimes... but instead, they're getting a 'FREE PASS'... while hundreds of thousands of people are locked in prisons for possessing a natural plant that even our founders cultivated and consumed.

Our system needs some serious change.

[Aries Warrior]

11:45 AM on 09/09/2011

Settlement ?

No indictments for fraud ?

[ebano]

12:00 PM on 09/09/2011

The former executives are investigated about how they publicly disclosed their exposure to risky loans, but this is not the same as selling securities with fraudulent information as 17 financial institutions were sued last friday.
Therefore, there is not fraud.
The NYT's article just wants to mislead low-profil people, isn't it?

[Blogging Patriot]

11:20 AM on 09/09/2011

Almost up until the time it was taken over by the government in the nation's financial crisis, Freddie Mac paid $15,000 a month to the lobbying firm of John McCain's campaign manager - from the end of 2005 through 2007. This was in addition to the $30,000 a month that Davis was paid from 2000 to 2005 by the so-called Homeownership Alliance, an advocacy organization that he headed and that was financed by Freddie and Fannie to fight regulation.

In addition, Freddie Mac secretly paid a Republican consulting firm $2 million to kill legislation that would have regulated the mortgage finance giant and Fannie Mae, three years before the government took control to prevent their collapse. The Republican senators targeted began hearing from prominent constituents and financial contributors, all urging the defeat of the regulatory bill.

In the end, there was not enough Republican support to warrant bringing it up for a vote and the measure died at the end of the 109th Congress.

Before 2000, Fannie Mae and Freddie Mac were Democratic strongholds. After 2000, Republicans ran their political operations. McLoughlin, who joined Freddie Mac in 2004 as chief of staff, had given $32,250 to Republican candidates over the years.

In December 2007, Freddie Mac contributed $250,000 to the Republicans GOP nomination convention.

http://www.huffingtonpost.com/2008/10/19/freddie-mac-paid-gop-cons_n_135995.html