Fannie Mae Class Action Lawsuit Filed for Investors

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A lawsuit has been filed against four former executives of Fannie Mae, claiming that they made false statements and failed to disclose material facts during the months leading up to the U.S. government’s seizure of the company last week. The Fannie Mae lawsuit seeks class action status on behalf of all investors who purchased securities between November 16, 2007, and September 5, 2008.

Fannie Mae is a government sponsored company that was privately owned and operated until last week when the federal government seized control to prevent the collapse of the mortgage industry. Along with Freddie Mac, another similar company, Fannie Mae owns or guarantees about half of the $12 trillion U.S. home loan market by providing mortgages for properties.

On Sunday, September 7, 2008, Fannie Mae was taken over and put under a conservatorship of the Federal Housing Finance Agency. Following the action, shares are now trading at less than $1, which is more than an 80% drop from Friday’s closing price.

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The Fannie Mae class action suit, which was filed in the U.S. District Court for the Southern District of New York , alleges that the former chairman of the company, former chief executive officer, former chief financial officer and former chief business officer made false and misleading statements about the financial condition of Fannie Mae to create inflated stock prices and protect their substantial financial compensation packages.

According to the lawsuit, CEO Daniel Mudd received over $14 million in compensation in 2006 and $12 million in 2007; chief business officer Robert Levin received over $9.5 million in 2006 and over $8.4 million in 2007; CFO Stephen Swad received over $4.8 million in 2007; and chairman of the board Stephen Ashley received over $500,000 in 2007.

Fannie Mae was severely affected by the sub-prime mortgage crisis in late 2007 and early 2008. Borrowers with poor credit defaulted on mortgages, leading to a sharp fall in demand for mortgage-backed securities that were not backed by Fannie Mae or Freddie Mac. This led to the companies becoming responsible for nearly 80% of all new mortgages.

A decline in home prices resulted from increasing foreclosures on mortgaged homes and stricter lending requirements made borrowing money for housing purchases more difficult. Fannie Mae suffered huge financial losses as its stock value fell more than 90% in August 2008 from the one year previous level.

The class action Fannie Mae lawsuit alleges that the four executives made false statements about the company’s financial position and the capital raised in Fall 2007 and Spring 2008. It also claims that they failed to disclose adverse facts to the public, deceived investors about the company’s business and prospects and artificially raised the company’s publicly traded securities, causing investors to buy stock at the inflated prices.

Tags: Fannie Mae, Freddie Mac, Mortgage Crisis
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87 Comments

  1. Richard

    Recently, I finally sold my 9700 common shares of FNM and FRE at a fraction of what I invested bringing my life savings and retirement down by over $80,000. I invested based on the statements that they would not be allowed to fail. I am a retired disabled veteran and federal civil servant now looking at a zero balance retirement savings in less that four years.

    Evidently there is no value in a government statement of not letting a fund fail and letting the investor equity go to zero. Thank you Barney Frankenstein.

    Please include me in the lawsuit as I do not plan to let the government help me fail either.

    N

  2. Hewitt

    When I purchased bothFannie and Freddie preferred on Jan. 4, 2008 I was let to believe by my broker, Wachovia Secutities and by my belief that both Fannie Mae and Freddie Mac preferred stocks were underwritten by the federal govrernment of the United States of America.

    It certainly was implied and presented as a quasi-goverment instition.
    I feel as many other investors do that I have been deceived by these Federal agencies and by the Officiers of these Government Institutions.

    Please include me also in the class action lawsuit. Thank you.

  3. Richard

    I was encouraged by my broker to buy the FNMPFD. Obviously, Wachovia nor any of the mentioned above brokerages did any due diligence before touting those issues. Include me in any class action suit. That broker was first Prudential, then Wachovia and now Wells Fargo. Any chance they will change again. I would if i were them.

  4. Gary

    I would like to be included in any lawsuits on behalf of preferred shareholders of FNM and FRE. I bought shares of FNM PRR on 4/1/08 and 1/23/08, and shares of FRE PRY on 4/28/08, relying on information that these companies had the full support of the US government and also from the credit rating agencies ratings of AAA.

  5. antonio

    I bought the FNMA 8.25% Pfd T. I havent received any information on the situation of this position. Could you help me and give me information on the status of this investment? Nobody in the FNMA office knows anything. Please advice, thanks, Antonio

  6. Linda

    I would like to join class action suits against FNM and FRE.

  7. Art

    I would like to join class action suits against FNM and FRE.

  8. Gayle

    Please let me know where or who to file with for shares of FNM.T
    Thanks

  9. Peter

    After researching all aspects of the risk in purchasing FNM stock, including reviewing FNM’s financial statements and monthly progress report pointing to sound finical condition and adequate reserve, I purchased $50,000 worth of FNM stock only to see my investment declined in value to a mere $5000 on September 8 2008, after the previous days proclamation by Tresury Secretaty Paulson indicating the Tresury’s plan to take over FNM via a concervatorship.

    I would like to participate in any class action law suite

  10. lola

    I WOULD LIKE TO KNOW ABOUT ANY CLASS ACTION SUITS AGAINST FNM AND FRE THAT I CAN JOIN. I WAS ADVISED BY BROKER AT MORGAN STANLEY TO PURCHASE THESE AS THEY SAFE BECAUSE THEY WERE INSURED BY GOV.

  11. Gerald

    We purchased 1600 shares of Fannie Mae preferred (FNMPRS) through our broker at Smith Barney in April 2008. We would like to join a class action lawsuit .

  12. Lenore

    How do I get in on the class action lawsuit? I own preferred stock in Fannie Mae that is worth nothing now.

  13. Constance

    I had purchaced Fannie Mae which I was told was a secure government backed mortgage fund. I purchased it thinking it was secure because it was backed by our government. I put a lot of my money into it. And I have lost a lot.

  14. Melissa

    I also put much of my IRA and retirement savings into Fannie Mae, based on their special status as a government sponsored entity. I don’t see how the government takeover could possibly be legal, particularly when we see other entities, like the “too big to fail” banks which had no special status as GSE’s being at least allowed to potentially regain their shareholder’s value.
    I agree that the lawsuit should be against the U.S. Treasury, and I would like to join.

  15. Frank

    How can we contact someone to participate in the lawsuit against Freddie Mac and Fannie Mae?

  16. Ed

    What is the status of the class action suit?

  17. Jack

    30M in fnm losses
    I’ll sue Clinton bush Obama or any1 else responsible for my losses.

  18. Gerald

    We lost 40K by owning FANNIE MAE series S preferred stock. How do we join a class action law suite? I’ve tried to locate an attorney on several occasions over the last couple of years and we’ve found no one willing to assist us. What is the status of those that were able to file a couple of years ago?

  19. J. Hanson

    would like to be included in the class action litigation

  20. howard

    I do the investing for my elderly parents who are no longer able to make any rational decisions for themselves. They have 24 hour home care which is very expensive. I was advised by our Morgan Stanley broker that the 2000 shares of FNM preferred bought May 2008 were safe,triple A rated and the dividend was safe. The investment is now virtually worthless. Would be interested in joining any class action suit.

  21. David

    I purchased 790 shares plus 445 shares of FNMA 8.25% Pfd stock in two separate transactions on 12/26/07. Is there a way for me to recover my losses?

  22. Richard

    I would like to Government to reset my mortgage lower by just the money they took from me by nationalizing my FRE and FNM. That is only fair since they too my 401k to zero. I am not delinquent on my payments yet. Such a decision by President and Congress would be a true step forward in helping real American home buyers and reducing mortgage debt. Why must we sue honest investment companies like Edward Jones and not the Government who misled us? Where is the real Government help for us relayed on its integrity?

  23. Bonnie

    As other comments posted my Broker assured me my investments in Fannie & Freddie were secure and backed by the government – needless to say over 1/3 of my savings went out the window. I feel that the goverment should have bailed out the preferred stockholders instead of paying legal fees, bonuses, etc. to the people responsible for this fiasco. My grandaughter has lost her house to foreclosure and looks like the same is going to happen to my daughter even though both have been involved in every program out there to save their homes – I am 70 – widowed and cannot help them financially – can’t sell the real estate I still own because of the downturn – I would definetely join in a class action suit.

  24. Raj

    I also bought Fannie Mae Preferred stock back in 08 and wek later went to $1.00. How can I become part of the law suit

  25. Julia

    I purchased 1200 shares of fanny mae and freddie mac stock trough Wells Fargo Investment in 2008. I was ashured that this was a sound investment and my retirement funds would yeild a 7.25% dividend that I could count on to live on. Iwas mislead by Wells Fargo personel, being led to believe that my investment was insured and that I could not loose my money. It seems Wells Fargo has used both selling stock and loaning money to take advantage of unwarry citizens and rob them of their hard earned retirement money. Please include me in any future class action suit. The banks are not to big to fail, they need to be accountable for their incompitancs!

  26. bob

    I have a arbitration hearing acussing the boker of selling me a insporptste invrstment and agaist Wells fargo for non supevisions as the investment was not suitable for someone on SSD. And based on their telling me it was backed by the Govt. Also that the underwriters should have been aware that they where undercapilize and there were flase statements made.

    Anyone who can send me a smilar story will help my case- which if I win will open the door for everyone else to sue.

  27. Shirley

    I purchased FNM PRS April 2008. Does anyone know the current status of the class action suit and who I can call to participate in the suit?

  28. joshua

    I have just bought a home a month ago and just found it was contaminated by methand was not anywhere in the paper when i bought the house it was bought from fanny mae/ freddie mac and nobody will do anything to help the loan is now with utah housing and they will not help there was a drug bust in 2008 that was not reported to the heath department it did not make it past west valley pd what what has happend to our government and how did this get missed

  29. JAACK

    No one on Washington cares one TINY LITTLE bit about anyone who lost money on FMA; FRE nor SAL MAE.
    They turn their backs on investors and care NOTHING about us the people keeping these Crooks in office.

    We need to clean house and bring REAL ETHICS back to government!

  30. andrew

    i bought 100,000 worth of fannie mae stock back in 08 now its worthless thanks to my broker how can i get involved in the class action lawsuite that i am hearing about

  31. James

    When are we all going to get together in a civil suit against these crooks? How can the retail investors who relied on their public statements recover part of their losses?

  32. ed

    Where is contact info for current class action against FRE and FNM?
    Thanks.

  33. Carrie J

    I and my husband invested $95,000.00 of our life’s saving-retirement into Fannie Mae because we listen to a Bank of America Financial Advisor who should have known May 14, 2008.

  34. stephanie

    This has been a problem long before 2007-2008 or what have you,I bought a trailer back in 2002 and Fannie Mae was dealing with Bank of America I had a $80,000 Dollar trailer with a $669.00 a mth and the trailer looked as if it wasn’t as much as they charged me.I didn’t know who to contact at that time and I was a single parent with two kids and had to pay for this myself,I had to try and struggle for 30yrs. to pay this off,but ended up losing my home I couldn’t afford to pay it off,I was promised that my payments would be $425.00 a month but my payments kept going up and went all the way to $669.oo a month i hope fannie Mae get what they deserves and the people get what they need,I wish I could have gotten in on the deal.

  35. ronald

    what happ to the help on saving homeowners from losing there home……i lost mine

  36. Chester

    I have Losses in both Fannie Mae and Freddie Mac ,I would Like to recover my loss +any other damages we can find.

  37. Hilda

    In today’s Washington Post Fannie Mae has earned ‘big bucks…in the billions.

    What about us…the preferred bondholders who lost our money…mine in a 3 month period. This money was supposed to be safe and secure.

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