Freddie Mac shareholders lose in subprime mortgage case

New York /
Nov.November 05, 2013 04:15 PM

A Federal Appeals Court in New York has dismissed a shareholder suit against Freddie Mac.

The shareholders alleged that they suffered losses because Freddie Mac failed to disclose the possibility that it would become insolvent prior to the 2008 economic crash. The plaintiffs, led by Central States, Southeast and Southwest Areas Pension Fund, accused the government-sponsored mortgage backer of hiding its precarious finances and investments in subprime mortgages.

The court ruled that the shareholders weren’t able to sufficiently link their losses to the alleged lack of full disclosure by the firm, which was taken over by U.S. regulators in September 2008.

“Central States does not plausibly allege a causal connection between the drop of the share price and the information revealed in the corrective disclosures,” a three-judge panel for the U.S. Court of Appeals for the Second Circuit wrote.

The losses incurred by the shareholders also coincided with the market-wide phenomenon of the housing bubble burst, the judges added, and were not apparently linked to the concealment of “hundreds of billions of dollars” of exposure to subprime mortgages.

Freddie Mac’s former CEO Richard Syron did not immediately respond to Reuters’ request for comment. [Reuters]Julie Strickland


Related Articles

arrow_forward_ios
Borrowers can now get a 30-year fixed-rate jumbo mortgage for $2 million at 2.65%. (iStock)
Jumbo mortgage lenders invade Fannie and Freddie’s turf
Jumbo mortgage lenders invade Fannie and Freddie’s turf
Freddie Mac’s economists said the slowdown will be caused by a hike in mortgage rates and limits on housing supply. (iStock)
Fannie, Freddie say housing market could see slight hiccup
Fannie, Freddie say housing market could see slight hiccup
New Fannie Mae and Freddie Mac restrictions mean higher mortgage rates for some. (Unsplash)
Mortgage rates on second homes rise as Fannie, Freddie pull back
Mortgage rates on second homes rise as Fannie, Freddie pull back
Meridian Capital Group CEO Ralph Herzka, Former Freddie Mac CEO David Brickman and  Barings CEO Mike Freno (Herza by Studio Scrivo; Brickman by Freddie Mac; Freno via Barings)
Ex-Freddie Mac boss looks to become top agency-backed CRE lender
Ex-Freddie Mac boss looks to become top agency-backed CRE lender
Former Freddie Mac CEO David Brickman and Meridian Capital Group CEO Ralph Herzka (Freddie Mac; Herza by Studio Scrivo)
Ex-Freddie Mac CEO launching lending platform with Meridian, Barings
Ex-Freddie Mac CEO launching lending platform with Meridian, Barings
Treasury Secretary Steven Mnuchin with Donald Trump. (Getty)
Treasury quits bid to privatize Fannie Mae, Freddie Mac
Treasury quits bid to privatize Fannie Mae, Freddie Mac
FHFA director Mark Calabria (Getty; iStock)
Federal housing agency extends forbearance options for multifamily landlords
Federal housing agency extends forbearance options for multifamily landlords
Future of Fannie, Freddie privatization is uncertain
Future of Fannie, Freddie privatization is uncertain
Future of Fannie, Freddie privatization is uncertain
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...