Wednesday, April 04, 2012

Ex-Fannie execs claim loans didn't meet subprime criteria

Attorneys for three Fannie Mae officials sued by the Securities and Exchange Commission asked a judge to dismiss the case on grounds that allegedly hidden — and risky — loans didn’t meet company definitions as subprime or Alt-A loans.

In December, The SEC accused the officials, among them former CEO Daniel Mudd, of misleading investors about the amount of subprime mortgages in Fannie’s portfolio.

But because those loans didn’t fit Fannie’s explicit classifications, lawyers for the officials said, those loan volumes cannot be considered an illegal misrepresentation.

The defense attorneys filed their motion to dismiss Friday. SEC spokeswoman Florence Harmon declined to comment.

In the complaint, the SEC said Fannie disclosed $8 billion of subprime loans on its books in the second quarter 2008, shortly before the government placed them into conservatorship. Fannie actually held far more, $110 billion, according to the agency.

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