The Federal Housing Finance Agency has begun the process of investigating investments made by Fannie and Freddie. Bank loan information has been subpoenaed dealing with the securities purchased by the companies. The FHFA believes that some of the liability for these securities may be with the sellers.
Resource for this article: Federal agency investigating Freddie and Fannie investments by Personal Money Store
Investments made by Freddie Mac and Fannie Mae
The investments made by mortgage lenders Fannie and Freddie during the housing boom integrated numerous mortgage securities. When the housing market crashed, these purchased securities lost many value. The value of these securities was tied closely to assets that are called "toxic" – things like short term loans for people with bad credit. Toxic assets like this being so effortlessly invested in may have possibly contributed to the bubble of the housing market.
The information about loans subpoenaed
The Federal Housing Finance Agency, which just lately took over control of Fannie and Freddie, has issued 6$ subpoenas to sellers of these poor credit loans. For a when, the agency tried to get the information from the banks and lenders voluntarily, but encountered significant resistance. There is some concern that the sellers of these packaged securities obscured the reality of the risk behind the loans.
What could happen with the subpoenas
The information that has been subpoenaed is intended to discover out if lenders hid some information. If the loan documents do reveal that details was hidden, the Wall Street firms that sold the securities might be on the hook. Thus far, Fannie and Freddie have lost more than $1$ 5 billion of taxpayer money. Money lost because of these loans might be reimbursed, if there was any mistruth in the loan documents. The most difficult thing could be really recovering money, since many of the lenders offering these fast cash loans loan products are now out of business.
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