SEC Settles With Ex-Freddie Mac Executives Over Allegations They Mislead Investors Over Mortgage Risks
The Securities and Exchange Commission has reached as settlement with three ex-Freddie Mac executives accusing them of knowingly misleading investors about the quality of high-risk mortgages that the company bought heading into the end of the housing boom several years ago. The former executives are ex-Freddie Mac (FMCC) CEO Richard Syron, ex-chief business officer Patricia Cook, and former senior VP of credit policy and portfolio management Donald Bisenius. The SEC accused the three executives of saying that there was little subprime exposure for Freddie even as they bought more loans with subprime qualities.
Under the agreement, the three ex-executives agreed that they wouldn’t sign certain reports that are required by finance chiefs or chief executives for a certain period of time, and would pay $310,000 to a fund to pay back bilked investors. Insurance from Freddie Mac will cover the amount.
Considering that the regulator tried to get bars to prevent the three of them from serving as company directors or officers, as well as pay financial penalties, the agreements reached highlight the challenges the U.S. has had in bringing and winning cases against individual executives over the 2008 economic crisis.
Per the settlement, the two sides disagreed about the extent to which Freddie Mac’s disclosures were at risk of misrepresentations, as well as about issues related to how Freddie was able to quantify its subprime loan exposure. The agreement acknowledges that in 2007 and 2008 market participants did not have one definition of subprime that was universally accepted to go by. SEC enforcement director Andrew Ceresney called the settlement’s limits on future activities as well as the financial payments, an “appropriate” resolution.
Meantime, three ex-Fannie Mae (FNMA) executives, including former Chief Risk Officer Enrico Dallavecia, ex-Chief Executive Daniel Mudd, and ex-executive VP of single family credit guarantee business Thomas Lund are facing a parallel case. The defendants have asked the court to rule that there was no evidence showing that the company’s subprime disclosure were misleading or false or that the three of them thought the disclosure were not accurate. Contact our mortgage fraud lawyers today if you suspect you were the victim of financial fraud.
SEC Reaches Settlement with Former Freddie Mac Executives, The Wall Street Journal, April 14, 2015
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Goldman to Buy Back $3.15B in RMBS to Resolve FHFA Claims, Stockbroker Fraud Blog, August 26, 2014
Massachusetts Files Lawsuit Against Fannie Mae, Freddie Mac, and FHFA, Stockbroker Fraud Blog, June 2, 2014
Bank of America Settles Mortgage Bond Claims with FHFA for $9.3B, Institutional Investor Securities Blog, March 29, 2014