Courthouse News Service.
MANHATTAN (CN) – Fannie Mae executives cannot dismiss claims that they understated their liabilities by hundreds of billions before the housing market crashed, a federal judge ruled.
Daniel Mudd headed the Federal National Mortgage Association, better known as Fannie Mae, from June 2005 to September 2008.
Financial regulators say that Mudd adopted increasingly strained euphemisms to describe subprime mortgages, defining them first as loans to borrowers with “damaged credit,” then to those with “weaker credit histories” and finally to ones who “had a credit problem in the past.”
In an Aug. 20, 2008, radio interview, Mudd allegedly insisted that such loans posed “about zero percent” exposure to Fannie Mae.
Mudd took a similarly rosy view toward the risks of Alt-A loans, eventually called “fast and easy” loans because they required less documentation, the Securities and Exchange Commission says.
Fannie Mae allegedly processed these loans under programs called Expanded Approval/Timely Payment Rewards, or EA, and MyCommunityMortgate, or MCM, and left both types of loans out of its subprime calculations.
This maneuver could leave Mudd and others liable to securities fraud claims, U.S. District Judge Paul Crotty ruled Friday.
Courthouse News Service.
WASHINGTON (CN) – A federal judge dismissed claims that Fannie Mae and Freddie Mac claimed false exemptions from recordation taxes in property transfers.
Lead plaintiff Robert Hager, of Nevada, sued the Federal National Mortgage Association and the Federal Loan Mortgage Corporation in a qui tam action which also involved intervening defendants Wells Fargo and the Federal Housing Finance Agency.
“Accepting plaintiffs’ argument would lead to near absurdity,” U.S. District Judge John Bates wrote in his opinion. “It would leave the statutory provisions, so sweeping their language, virtually meaningless: Fannie Mae and Freddie Mac would be free only from capitations and taxes upon personal property. The entities’ day-to-day operations would be subject to the full panoply of taxation.”
Hager sued the government-sponsored mortgage underwriters in the District of Columbia and Nevada Federal Courts, challenging their claimed exemption from the recordation tax, a tax levied when a deed that conveys title to real property or a security interest instrument is submitted for recordation.
More from the WSJ:
Mr. Wasendorf was arrested July 13 on charges of lying to regulators following a suicide attempt on July 9 that included a confession that authorities say detailed a nearly 20-year fraud against Peregrine’s customers. Regulators have estimated that about $215 million in customer money is missing.
Peregrine, which did business as PFGBest, filed for bankruptcy July 10.
No date has yet been set for Mr. Wasendorf to be arraigned on the charges, according to a statement from the U.S. Attorney’s Office.
A grand jury in Cedar Rapids, Iowa, on Peregrine took just one day to hear testimony and hand up the indictment against Mr. Wasendorf.
California college district sues JP Morgan over financing deal.
SAN FRANCISCO (Reuters) – A California community college district is suing JP Morgan Chase over the bank’s efforts to enforce an exotic financing contract agreed in 2006 when interest rates were much higher than now.
Peralta Community College District filed suit in state court on Monday, asking the court to declare the 2006 contract void and unenforceable, according to the suit, which estimated the contract is now worth between $3 million and $4 million.