Fannie, Freddie Brushed Off Subprime Warnings

Companies ignored risk experts for years
By Kevin Spak,  Newser Staff
Posted Dec 9, 2008 8:36 AM CST
In this July 13, 2008 file photo, the Freddie Mac's corporate offices are seen in McLean, Va.   (AP Photo/Pablo Martinez Monsivais, File)
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(Newser) – Fannie Mae and Freddie Mac can’t say they weren’t warned. Internal documents obtained by the Washington Post show that both companies had internal factions who stressed the dangers of subprime mortgages several years ago. At Freddie Mac, the former chief enterprise risk officer wrote that the loans could hurt borrowers and the firm. “The potential for the perception and the reality of predatory lending with this product is great,” he wrote.

Fannie meanwhile was urged to develop an “underground” program to buy the subprime mortgages, but was warned about the growing risks they posed. The House Committee on Oversight and Government Reform has the documents, and could bring them up in today’s hearing on the government-sponsored enterprises’ collapse.