State of California Sues Fannie Mae and Freddie Mac Over Foreclosures

December 21, 2011Marketsby EW News Desk Team


California’s attorney general has filed a lawsuit against the largest US mortgagers Fannie Mae and Freddie Mac in a bid to get the companies to reveal answers over their lending and foreclosure practices.

AG Kamala Harris is suing the two mortgage giants in essentially identical lawsuits over 12,000 foreclosed properties in California where they served as landlords, using the legal approach to insist that the firms respond to 51 investigative subpoenas.

According to a report by the Associated Press, the firms are also pressed to “reveal whether they have information on the decreased value of those homes due to drug dealing or prostitution, as well as explosives and weapons found on those vacant properties.”

Harris is also questioning if the mortgage firms complied with civil right laws against unlawful convictions and foreclosures.

Both Fannie Mae and Freddie Mac were taken over by the Federal Housing Finance Agency in September 2008 to save them from failing. The two firms own or guarantee almost half of all U.S. mortgages, or 31 million loans.

According to the FHFA, taxpayers have paid $150 billion to bailout the firms, warning that the final cost could run up to $259 billion.

Related: Fannie Mae asks for $7.8 billion more in federal aid

Two former CEOs at Fannie Mae and Freddie Mac last week became the highest-profile individuals to be charged in connection with the 2008 financial crisis. In a lawsuit filed in New York, the Securities and Exchange Commission brought civil fraud charges against six former executives at the two firms, including former Fannie CEO Daniel Mudd and former Freddie CEO Richard Syron.

The executives were accused of understating the level of high-risk subprime mortgages that the companies held just before the housing bubble burst.

Related Infographic: America’s federal budget and debt burden in 2011

Related: US subprime: Government bailout and its effects


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