This morning, the Federal Housing Finance Agency announced that it will be investigating the investments of mortgage companies Freddie and Fannie. The agency issued subpoenas about the bank loan details and securities that the two large companies purchased. If there was a lack of information in any of the paperwork for the securities, the sellers can be liable for the cost of those securities.
Article source: Federal agency investigating Freddie and Fannie investments by Personal Money Store
Fannie and Freddie’s investments
Mortgage lenders Fannie and Freddie made investments in mortgage securities that are turning out to be questionable. The value of these packaged securities dropped . Many of these packaged securities integrated mortgage short term loan for individuals with poor credit. There is a belief that Fannie and Freddie fanned the flames of the bubble by being so willing to purchase these securities.
Loan details subpoenaed
After taking control of Fannie and Freddie, the Federal Housing Finance Agency issued 6$ separate subpoenas. The agency has been attempting to get details on these loans for a when, but has encountered resistance. There is some concern the sellers of these packaged securities obscured the reality of the risk behind the loans.
What the subpoenas could change
The subpoenas issued to sellers of these debt loans seek to determine whether some info was not shared. Paying for the loss could possibly be the responsibility of the firms that sold the packages, if they did hide information. Thus far, Fannie and Freddie have lost more than $1$ 5 billion of taxpayer money. If there are any lies discovered within the loan documents, then the sellers can have to pay for money lost. The businesses that offered these quick personal loans products may very well have gone out of business.
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