SEC sues ex-Fannie, Freddie execs

The Securities and Exchange Commission recently brought civil fraud charges against six former top executives at Fannie Mae and Freddie Mac.

The SEC claims the executives misled the government and taxpayers about the quality of subprime mortgages held by the government-sponsored entities from the onset of the housing market crisis.

The executives facing charges said the government reviewed and approved all of Fannie Mae and Freddie Mac's financial disclosures, thus they are not to blame for the housing market downfall in 2007, according to The Associated Press.

The lawsuit states Fannie Mae told investors in 2007 they had $4.8 billion worth of subprime loans, but the SEC maintained the agency actually had $43 billion worth of products targeted to borrowers with weak credit. The lawsuit also claims Freddie Mac told investors in 2006 that it had between $2 billion and $6 billion in subprime mortgages, but the SEC claims the lender had closer to $141 billion, the source states.

The SEC said that Fannie Mae and Freddie Mac agreed to settle with regulators and cooperate with the investigation of its former executives, as well as with the Justice Department who is also investigator the lenders, The New York Times reports. The outcome of the lawsuit with the SEC will rely largely on whether Fannie and Freddie misled investors about the quality of the mortgages, or failed to provide important documentation.

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