Companies Agree to Cooperate in SEC Actions


Washington, D.C., Dec. 16, 2011 — The Securities and Exchange Commission today charged six former top executives of the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) with securities fraud, alleging they knew and approved of misleading statements claiming the companies had minimal holdings of higher-risk mortgage loans, including subprime loans.

Additional Materials Below

SEC complaint vs. Freddie Mac executives
SEC complaint vs. Fannie Mae executives
Non-Prosecution Agreement – Freddie Mac
Non-Prosecution Agreement – Fannie Mae

Fannie Mae and Freddie Mac each entered into a Non-Prosecution Agreement with the Commission in which each company agreed to accept responsibility for its conduct and not dispute, contest, or contradict the contents of an agreed-upon Statement of Facts without admitting nor denying liability. Each also agreed to cooperate with the Commission’s litigation against the former executives. In entering into these Agreements, the Commission considered the unique circumstances presented by the companies’ current status, including the financial support provided to the companies by the U.S. Treasury, the role of the Federal Housing Finance Agency as conservator of each company, and the costs that may be imposed on U.S. taxpayers.

Three former Fannie Mae executives – former Chief Executive Officer Daniel H. Mudd, former Chief Risk Officer Enrico Dallavecchia, and former Executive Vice President of Fannie Mae’s Single Family Mortgage business, Thomas A. Lund – were named in the SEC’s complaint filed in U.S. District Court for the Southern District of New York.

The SEC also charged three former Freddie Mac executives — former Chairman of the Board and CEO Richard F. Syron, former Executive Vice President and Chief Business Officer Patricia L. Cook, and former Executive Vice President for the Single Family Guarantee business Donald J. Bisenius — in a separate complaint filed in the same court.

“Fannie Mae and Freddie Mac executives told the world that their subprime exposure was substantially smaller than it really was,” said Robert Khuzami, Director of the SEC’s Enforcement Division. “These material misstatements occurred during a time of acute investor interest in financial institutions’ exposure to subprime loans, and misled the market about the amount of risk on the company’s books. All individuals, regardless of their rank or position, will be held accountable for perpetuating half-truths or misrepresentations about matters materially important to the interest of our country’s investors.”

The SEC is seeking financial penalties, disgorgement of ill-gotten gains with interest, permanent injunctive relief and officer and director bars against Mudd, Dallavecchia, Lund, Syron, Cook, and Bisenius. Both lawsuits allege that the former executives caused the federal mortgage firms to materially misstate their holdings of subprime mortgage loans in periodic and other filings with the Commission, public statements, investor calls, and media interviews. The suit involving the Fannie Mae executives also includes similar allegations regarding Alt-A mortgage loans. The suit against the former Fannie Mae executives alleges they made misleading statements — or aided and abetted others — between December 2006 and August 2008. The former Freddie Mac executives are alleged to have made misleading statements — or aided and abetted others – between March 2007 and August 2008.

The SEC’s complaint against the former Fannie Mae executives alleges that, when Fannie Mae began reporting its exposure to subprime loans in 2007, it broadly described the loans as those “made to borrowers with weaker credit histories,” and then reported — with the knowledge, support, and approval of Mudd, Dallavecchia, and Lund — less than one-tenth of its loans that met that description. Fannie Mae reported that its 2006 year-end Single Family exposure to subprime loans was just 0.2 percent, or approximately $4.8 billion, of its Single Family loan portfolio. Investors were not told that in calculating the Company’s reported exposure to subprime loans, Fannie Mae did not include loan products specifically targeted by Fannie Mae towards borrowers with weaker credit histories, including more than $43 billion of Expanded Approval, or “EA” loans.

Fannie Mae’s executives also knew and approved of the decision to underreport Fannie Mae’s Alt-A loan exposure, the SEC alleged. Fannie Mae disclosed that its March 31, 2007 exposure to Alt-A loans was 11 percent of its portfolio of Single Family loans. In reality, Fannie Mae’s Alt-A exposure at that time was approximately 18 percent of its Single Family loan holdings.

The misleading disclosures were made as Fannie Mae’s executives were seeking to increase the Company’s market share through increased purchases of subprime and Alt-A loans, and gave false comfort to investors about the extent of Fannie Mae’s exposure to high-risk loans, the SEC alleged.

In the complaint against the former Freddie Mac executives, the SEC alleged that they and Freddie Mac led investors to believe that the firm used a broad definition of subprime loans and was disclosing all of its Single-Family subprime loan exposure. Syron and Cook reinforced the misleading perception when they each publicly proclaimed that the Single Family business had “basically no subprime exposure.” Unbeknown to investors, as of December 31, 2006, Freddie Mac’s Single Family business was exposed to approximately $141 billion of loans internally referred to as “subprime” or “subprime like,” accounting for 10 percent of the portfolio, and grew to approximately $244 billion, or 14 percent of the portfolio, as of June 30, 2008.

The SEC’s complaint alleges that Mudd violated Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rules 10b-5(b) and 13(a)14(a) thereunder, and Section 17(a)(2) of the Securities Act of 1933 (the “Securities Act”); and that Mudd aided and abetted Fannie Mae’s violations of Sections 10(b) and 13(a) of the Exchange Act and Exchange Act Rules 10b-5(b), 12b-20, 13a-1, and 13a-13 thereunder. The SEC complaint also alleges that Dallavecchia violated Section 17(a)(2) of the Securities Act and aided and abetted Fannie Mae’s violations of Sections 10(b) and 13(a) of the Exchange Act and Exchange Act Rules 10b-5(b), 12b-20, 13a-1, and 13a-13 thereunder. Finally, the SEC complaint alleges that Lund aided and abetted Fannie Mae’s violations of Sections 10(b) and 13(a) of the Exchange Act and Exchange Act Rules 10b-5(b), 12b-20, 13a-1, and 13a-13 thereunder.

The SEC’s complaint alleges that Syron and Cook violated Exchange Act Section 10(b) and Rule 10b-5(b) thereunder and Securities Act Section 17(a)(2); that Syron violated Exchange Act Rule 13a-14; and that Syron, Cook and Bisenius aided and abetted violations of Sections 10(b) and 13(a) of the Exchange Act and Rules 10b-5(b), 12b-20 and 13a-13 thereunder.

The SEC’s investigation of Fannie Mae was conducted by Senior Attorneys Natasha S. Guinan, Christina M. Marshall, Liban Jama, Mona L. Benach, and Associate Chief Accountant, Peter Rosario, under the supervision of Assistant Director Charles E. Cain, and Associate Director Stephen L. Cohen. Sarah Levine and James Kidney will lead the SEC’s litigation efforts.

The SEC’s investigation of Freddie Mac was conducted by Senior Attorneys Giles T. Cohen and David S. Karp and Assistant Chief Accountant Avron Elbaum of the SEC’s Division of Enforcement under the supervision of Assistant Director Charles E. Cain and Associate Director Stephen L. Cohen. Kevin O’Rourke and Suzanne Romajas will lead the SEC’s litigation efforts.

# # #

For more information about these enforcement actions, contact:

Robert S. Khuzami, Director
(202) 551-4894

Lorin L. Reisner, Deputy Director
(202) 551-4781

Stephen L. Cohen, Associate Director
(202) 551-4472

Charles E. Cain, Assistant Director
(202) 551-4911



SEC complaint vs. Freddie Mac executives

SEC complaint vs. Fannie Mae executives

Non-Prosecution Agreement – Freddie Mac

Non-Prosecution Agreement – Fannie Mae

  1. david b. says:

    a few thoughts of a famous founding father a few hundred years ago plus a few

    No Congress, no President has been strong enough to stand up to the foreign-controlled Federal Reserve Bank. Yet there is a catch – one that President Kennedy recognized before he was slain – the original deal in 1913 creating the Federal Reserve Bank had a simple backout clause. The investors loaned the United States Government $1 billion. And the backout clause allows the United States to buy out the system for that $1 billion. If the Federal Reserve Bank were demolished and the Congress of the United States took control of the currency, as required in the Constitution, the National Debt would virtually end overnight, and the need for more taxes and even the income tax, itself. Thomas Jefferson was concise in his early warning to the American nation, “If the American people ever allow private banks to control the issuance of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the people of all their property until their children will wake up homeless on the continent their fathers conquered.”

    best regards
    David B.

    • lvent says:


  2. david b. says:

    here is my letter to cong elijaah cummings of the 7th district of maryland

    best regards, David

    Dear Congressman E. Cummnigs c/o Ms. D. Walsh:

    Attn: Ms Obrist, Ms Hiserman, Mr Barry<Mr. Potter, Mr. Chung(attorney at hud ) Mr Chung ( private attorney, Mr Hollis none are representing me before HUD or the FED in this matter, i am pro se informa pauperis QUI TAM in this matter before HUD

    I am writing you for the second and third times to inform you of my mortgage discrimination complaint pursuant to U.S.C. 49 Fair Housing Act of 1964 and 1986 and its amandments in reference to my allegations of reverses redlining by the New York Federal Reserve Bank of New York,

    Mr William O. Dudley President. This complaint as you know has been filed with SECHUD DONOVAN and Mark Bryan Asst Secretary of the FHA/FEHO Administration and Program Office here in Seattle,Washington, The legal process of my administrative federal lawsuit as a permanent and total disabled veteran from the Vietnam/Cold War era was served on the Fed Bank's mortgage servicer in Texas, aka Nationstar. I object to the Federal Reserve continuing to conduct alleged mortgage discrimination on me as a disabled veteran as the owner of my second trust mortgage within their Maiden Lane I mortgage trust. I object to it because the Federal Reserve alleges that it is the lead agency to stop redlining and reverse redlining yet it owns my loan that is continuing to discriminate against me for alleged fraudulent interest obtained by selling me an alleged predatory loan as defined by the Office of the Comptroller of the Curreny in Washington, D.C as well as allegedly fraudulent elevated miscalculated mortgage balance and misrepresented loan terms as part of a predatory discriminatory loan package by Steve Nassar of PACNW Mortgage in Portland, Oregon and EMC CHASE MORTGAGE GROUP, OF LEWINSVILLE, TEXAS AND JP MORGAN CHASE AND COMPANY OF COLUMBUS, OHIO AND NEW YORK CITY. CHAIRMAN BOWLES OF THE CHASE BOARD HAS BEEN OFFICIALLY SERVED BY HUD AND THEIR CORPORTATE REGISTERED REPRESENTATIVE IN OLYMPIA, WA. IE CT CORPORATION BY A PRIVATE PROCESS SERVER ON NOVEMBER 29, 2011.

    In this case, all my complaints to the OCC, Mr. Bill Walsh office and his aide and Senior Deputy and legal counsel or merely covered up by their Office of the Ombudsmen, M. Sharon Gilstrap and their customer service center in Houston(OCC). Every time I filed a complaint with the OCC they cover up and erase the previous complaint. In addition, when I filed my complaint to the FED RESERVE via their website about EMC CHASE Mortgage Group, the FED merely transferred the complaint to the OCC who then covers it up and does nothing.

    This is NOT the intent of Congress as I understand it, to have homeowners complaints covered up and then do the shuffle and it disappears. This has been going on for four years and I am writing you to ask for your support and assistance to resolve my complaints against emc mortgage chase and the FEDRESBANK of New York for mortgage discrimination that violates the Fair Housing Act of 1964. My complaint has been filed with SECHUD DONOVAN and President Obama and The Regional ADministrator for Region Ten in Seattle WAshington FHA/FEHO office in Seattle, Washington, Ms. Yvonne Marte Enforcement Branch Chief.

    Since I filed my HUD complaint Chase attorneys in Seattle have conveyed alleged threats of foreclosure by saying I am in default of my mortage payments while simulaneously EMC Chase mortgage group report to the Experian Credit Bureau that I am NOT behind or ever late in four years. This unabated alleged discrimination of me by EMC CHASE MORGAGE GROUP has been going on for four years including the creation of a new mortgage on my house where I already have a mortgage. The second first trust mortgage is one that I never have applied for nor gave permission to be created with new loan terms as an alleged predatory loan. So now I have two loans on my house worth $ 600.000+ for a house that is worth approximately $ 150,000. As I said I never applied for this new mortgage and I have not had any mortgage statements on my mortgage since March, 2011 and Chase will not even tell me my mortgage balances on either loan and have declared me persona non grata in all their branches because I filed a complaint with HUD and asked for a written document as to the balance of my mortgage.

    I pay more than I am supposed to each month and my extra money is then added t othe mortgage balance instead of subtracting it.

    Chase attorneys have put in writing to my attorney here in Vancouver, Wa., rep'ing me before Chase solely on the issue of no mortgage statements for either of the two alleged mortgage account numbers, that Chase does not have to comply with federal law that provides that all homeowners with ARM loans shall be given a mortgage statement every month. That law is the TILA federal law and the new DODD FRANK ACT that went into effect on July 1, 2011.

    Please provide assistance to me in this matter. and if possible write a letter of inquiry of SECHUD DONOVAN concerning this matter. Thank you for fighting for we homeowners and for your service to our country.

    best regards
    David F. Black, A.A., B.A., M.B.A., C.D.P., DOD/VA DAVPRM E3/Midshipman, USNR/USN, USNA '69, Annapolis, Md. National Security Agency, Ft. Meade, Md. '63-'65, U.S.S. Drum SS 228, Silent Service, DE-680 Destroyer Escort, U.S.S. Loeser. Permanent Life Member of Disabled American Veterans & Vietnam Veterans of America, Member Uniformed Services Disabled and Retriees Veterans Association,, Member of Veterans of Foreign Wars.,,

  3. talktotennessee says:

    Just another way to whitewash the industry and get the issue behind them, or so they think! If they hold someone responsible then they can point and say, “look we did something about the problem” but in reality they are doing nothing. The lawyers will get the ‘spoils’ as they say and the government will reap a little money but no teeth and no modification for homeowners, no principal write down, nothing. Dudley, head of the Fed Reserve is calling for serious principal write down on targeted loans. Have not read it but anyone want to guess this is for no-default, underwater mortgages for upper echelon borrowers? The rest of us never deserved loans in the first place, right?

  4. talktotennessee says:

    This is nothing more than the government taking advantage of the OPPORTUNITY to gain a little pay back and satisfy investor claims. Still an insider transaction that results in “no fault” admitted. Yes, the homeowner who was sold the scam is still blamed here. Not much helps us really unless we sue individually or as a class and so far there hasn’t been much activity there. One has to deal with status of limitations too. Stopping foreclosure is the only method working because they still won’t allow bankruptcy courts to modify these loans! It gets a little discouraging frankly. Everyone knows fraud occurred, it has been revealed, and is proven but the homeowner who was taken advantage of still suffers.
    I was sold an Alt A loan when I could have qualified for a prime loan and rate but the Alt A brought the mortgage broker more money in his pocket at the time so that was what he took to the table, telling me I could do no better.
    This is a con but no one cares, “You should have known better,” they say when the whole world bought into the same credit derivative product swap scam and did not know better!

    • lvent says:

      They are charging these crooks with Securities Fraud, a Federal Crime….. and promised them there will be no criminal prosecutions and no fines if they cooperate with their investigation……? Why charge and investigate them then? Whatever they find out, the main criminals will never be held accountable! Who are they using them to go after? the little fish?…These crimes start at the top of the pyramid…! Even at the top, they were only doing what they were told to do..The orders came from the Politicians…Ex- CEO of Fannie Mae, Mr. Mudd already said that the Government approved the subprime loans so WTF are they doing? Putting on a show, and it is a really bad one!

  5. lied says:

    where is the foreclosure moratorium we so desperately need.we have children and don’t want to be homeless. they made loans to people for house we couldn’t afford.l have wells fargo letter stating they put me in a stated income loan. so they new at closing I could not afford my mm. home.every one involved should go to jail no one did income verification although I had a good job. they new they were scamming us but they could get away with it because they are the banks and we are the homeowner s who signed for these liar loans. sorry doesn’t make I it ok or legal

  6. talktotennessee says:

    Of course guys this is what we want, charges against the execs that perpetrated fraud. But think about this, the SEC is not collecting money for us to pay down our principal or modify our loans or make restitution for anyone except to go into the national coffers. Yes, yes, yes, that is good, desirable, return the money, punish misdeeds but we have nothing for the homeowners in the ranks here.
    Support the AGs in your states to do as they have CA and NV and NY and MD. This is where the action is that will return money to the people. I say that for all of you listening because my state TN is so wrapped up in Corporate welfare and the AG is in the pocket of big business that there is little hope here unless I could stir a grassroots movement and frankly OCCUPY has had a hard time gaining any ground in TN. The governor threw them out of a public park in Nashville, TN.
    I am depending on you guys out there to write your state people in support of restitution for the people who were defrauded!

    • lvent says:

      talktotennenssee, Bloomberg news is already reporting, there will be NO criminal prosecutions and NO fines for these individuals…It would cost the taxpayers too much money!…All they are asked to do is cooperate with the investigation…The ex-CEO of Fannie says, THE GOVERNMENT APPROVED THOSE SUBPRIME LOANS….!!! This is all a show…as I have been saying, they were all in on our demise!

  7. lvent says:

    $700 trillion dollars late!…and Obama still saying they did nothing criminal…!

    • lvent says:

      Check our the latest Keiser Report where Max rips Jamie Dimon:

      • lvent says:

        Bloomberg reporting there is a pact that there will be no criminal prosecutiions of these execs…Why? because it would cost taxpayers too much to prosecute these individuals!..NO FINES EITHER!…the terms of the deal are they must COOPERATE!!!!! HA! What a joke!…..Also, the former CEO of Fannie, Mr. Mudd says, the GOVERNMENT APPROVED THOSE SUBPRIME LOANS….

  8. Fred North says:

    Will these pretentious suits be forced into doing to more to help homeowner/victims and the rest of the economy that they willfully participated in destroying ? Don’t hold your breath! This is a raging class war, and homeowners are largely considered “guilty” until proven “innocent” Fannie turned into a monster, the antithesis of an organzation that allegedly helps people become or perserve homeownership, just accomplices of financial tyranny from the Banksters that could care less about driving people into debt bondage. Reject their paperwork!

  9. Dom Tomilon says:

    Help the homeless! BTW, where’ s the criminal action?

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