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House Hearing Begins on Fannie Mae and Freddie Mac
Here is an excerpt from an alarming Washington Post article, which reports that Fannie Mae and Freddie Mac may have knowingly offered and purchased subprime mortgages that they knew to be harmful to borrowers and the companies themselves: Internal Freddie Mac documents show that senior executives at the company were warned years ago that they were offering mortgages that could pose dangers to the firm, hurt borrowers and generate more risky loans throughout the industry. At Fannie top executives were told it was necessary to develop "underground" efforts to buy subprime mortgages because of competitive pressures, although there were growing risks and borrowers often didn't understand the terms of the loans, documents show. The House Committee on Oversight and Government Reform, which has the documents, is holding a hearing now to discuss Fannie and Freddie's downfall. The companies were seized by the government three months ago after nearly collapsing in the wake of billions of dollars of losses on mortgages. In a memo to former Freddie chief executive Richard Syron and other top executives, former Freddie chief enterprise risk officer David Andrukonis wrote that the company was buying mortgages that appear "to target borrowers who would have trouble qualifying for a mortgage if their financial position were adequately disclosed." Andrukonis warned that these mortgages could be particularly harmful for Hispanic borrowers, and they could lead to loans being made to people who would be unlikely to pay them off. "The potential for the perception and the reality of predatory lending with this product is great," Andrukonis wrote.
Posted on Tuesday, December 9, 2008By
m.erickson
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