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

(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.

In this July 13, 2008 file photo, the Freddie Mac's corporate offices are seen in McLean, Va. (AP Photo/Pablo Martinez Monsivais, File)

In this May 2, 2007 file photo, the Fannie Mae building in Washington is seen. (AP Photo/Manuel Balce Ceneta, File)

In this Dec. 3, 2007 file photo, former Fannie Mae President and Chief Executive Officer Daniel Mudd speaks during a forum on housing at the National Press Club in Washington. (AP Photo/Manuel Balce Ceneta, file)

Richard Syron, chairman and CEO of Freddie Mac, answers a reporter's question in Boston in this April 27, 2007 file photo. (AP Photo/Stephan Savoia, file)

« Prev« Prev | Next »Next » Slideshow

To report an error on this story, notify our editors.

More Newser Stories

SEC Sues Ex- Fannie, Freddie CEOs

Firms wildly misrepresented exposure to subprime loans: feds

(NEWSER) - Federal regulators are suing former Fannie Mae boss Daniel Mudd and ex-Freddie Mac CEO Richard Syron for vastly downplaying the volume of subprime loans their firms held. Freddie Mac suggested it was exposed to between $2 billion and $6 billion in subprime loans; the figure was more like $244 billion. Fannie Mae pointed to $4.8 billion in subprime exposure when the figure was really 10 times that, the SEC says. The regulators have reached non-prosecution agreements with both firms. More»

SEC Poised to Charge Fannie, Freddie Execs

But regulatory agency disagrees, and nothing has yet been filed

(NEWSER) - The SEC is making moves toward charging current and former Fannie Mae and Freddie Mac executives, sources tell the Washington Post , but the Federal Housing Finance Agency disagrees with the move. The SEC has sent notices to at least four senior executives over the past eight weeks warning them they may face civil charges, although nothing has been formally filed and the SEC could still change its mind. The executives would be charged with violations related to the housing market collapse, including a failure to provide investors with necessary information about the companies' mortgage holdings. More»

Fannie, Freddie CEOs in Line for Millions in Severance

Mudd, Syron each stand to net at least $6M; critics rip 'pay for failure'

(NEWSER) - The CEOs of Freddie Mac and Fannie Mae will receive millions in severance pay, pension payouts, and other benefits after the government’s takeover of the mortgage giants, the Los Angeles Times reports. Fannie’s Daniel Mudd stands to take away $7.3 million, and Freddie’s Richard Syron will get $6.3 million—though the companies’ tanking stock makes the severance packages much smaller. More»

Fed to Crack Down on Subprime Loans

Also plans to extend low-cost overnight loan program for banks

(NEWSER) - The Federal Reserve will issue new rules next week restricting subprime lending and other exotic loans aimed at borrowers with weak credit, Ben Bernanke said today. He said the Fed is also considering extending the overnight low-cost loan program, which helps big banks in need of quick cash, a sign that the Fed believes the financial crisis will continue into 2009. More»

Freddie Mac Loses $2B, Seeks Cash

No. 2 mortgage lender's capital is close to regulatory minimum

(NEWSER) - Freddie Mac, the second-largest US mortgage lender, lost $2.02 billion this quarter, its worst quarter ever, the company said this morning. With core capital almost below its regulatory minimum, the company is looking for fast cash, hiring Goldman Sachs and Lehman Brothers to help bail it out, and “seriously considering” slashing its dividend by 50%. Shares fell 7% in pre-market trading. More»

NEWS FROM OUR PARTNERS

What is Newser?

Face it: there's too much news. At Newser, we choose the most thought-provoking and entertaining stories from hundreds of US and international sources and reduce them to a headline, picture, and two paragraphs. And we do it 24/7—you can come back morning, noon, night (and in between) for something new that matters. Read less, know more.

Learn more »

Partnering with: Slate

View Newser on the mobile website

Fannie, Freddie Brushed Off Subprime Warnings

Companies ignored risk experts for years

OTHER STORIES ON OUR RADAR

subprime mortgages • Freddie Mac • Fannie Mae • Richard Syron • subprime crisis • House Committee on Oversight and Government Reform • Daniel Mudd

MOST POPULAR STORIES

[ By Views ]

[ By Comments ]

More Newser Stories

SEC Sues Ex- Fannie, Freddie CEOs

Firms wildly misrepresented exposure to subprime loans: feds

SEC Poised to Charge Fannie, Freddie Execs

But regulatory agency disagrees, and nothing has yet been filed

Fannie, Freddie CEOs in Line for Millions in Severance

Mudd, Syron each stand to net at least $6M; critics rip 'pay for failure'

Fed to Crack Down on Subprime Loans

Also plans to extend low-cost overnight loan program for banks

Freddie Mac Loses $2B, Seeks Cash

No. 2 mortgage lender's capital is close to regulatory minimum

About Us

Site

Newser By Users

Community

Site Maps

Tools

More News

What is Newser?

Fannie, Freddie Brushed Off Subprime Warnings

Companies ignored risk experts for years

Bookmark & Share

OTHER STORIES ON OUR RADAR

subprime mortgages • Freddie Mac • Fannie Mae • Richard Syron • subprime crisis • House Committee on Oversight and Government Reform • Daniel Mudd

MOST POPULAR STORIES

[ By Views ]

[ By Comments ]

More Newser Stories

SEC Sues Ex- Fannie, Freddie CEOs

Firms wildly misrepresented exposure to subprime loans: feds

SEC Poised to Charge Fannie, Freddie Execs

But regulatory agency disagrees, and nothing has yet been filed

Fannie, Freddie CEOs in Line for Millions in Severance

Mudd, Syron each stand to net at least $6M; critics rip 'pay for failure'

Fed to Crack Down on Subprime Loans

Also plans to extend low-cost overnight loan program for banks

Freddie Mac Loses $2B, Seeks Cash

No. 2 mortgage lender's capital is close to regulatory minimum

About Us

Site

Newser By Users

Community

Site Maps

Tools

More News

What is Newser?