This morning, the Federal Housing Finance Agency announced that it could be investigating the investments of mortgage companies Freddie and Fannie. The subpoenas issued cover files on the short term loan and bank loan information used in securities purchased by the companies. The FHFA believes that some of the liability for these securities may be with the sellers.
Investments made by Freddie Mac and Fannie Mae
Mortgage lenders Fannie and Freddie made investments in mortgage securities that are turning out to be questionable. When the housing market crashed, these purchased securities lost many value. These packaged securities included a lot of “toxic” assets like mortgage installment loans for bad credit for people with a bad credit score. There is a belief that Fannie and Freddie fanned the flames of the bubble by being so willing to purchase these securities.
The info about loans subpoenaed
The Federal Housing Finance Agency, which just lately took over control of Fannie and Freddie, has issued 6$ subpoenas to sellers of these poor credit loans. For a while, the agency tried to get the information from the banks and lenders voluntarily, but encountered significant resistance. There is some concern that the sellers of these packaged securities obscured the reality of the risk behind the loans.
The way the subpoenas could change things
The info that has been subpoenaed is intended to find out if lenders hid some info. If the loan documents do reveal that info was hidden, the Wall Street firms that sold the securities could possibly be on the hook. This payback is important, since Freddie and Fannie have lost more than $1$ 5 billion of taxpayer money . Money lost because of these loans might be reimbursed, if there was any mistruth within the loan documents. The companies that offered these quick personal loans products may very well have gone out of business.
