NEW YORK: Fannie Mae has reached a $170m settlement of a lawsuit accusing it of misleading shareholders about its finances, risk management and mortgage exposure before it was seized by the US government during the 2008 financial crisis.
The settlement, which requires court approval, was disclosed in a Friday filing with the US District Court in Manhattan.
It resolves shareholder allegations that Fannie Mae defrauded shareholders and inflated its stock by issuing false and misleading statements about its internal controls, capitalisation, accounting, and exposure to subprime and low-documentation “Alt-A” mortgages.
The settlement allocates $123.8m to common stockholders and $46.2m to preferred stockholders between November 8, 2006 and September 5, 2008. Fannie Mae’s market value peaked during that period at more than $60bn. It is now $2.71bn. “We are pleased to put this matter behind us,” Joseph Grassi, Fannie Mae’s interim general counsel, said. “This is another sign of progress as Fannie Mae continues our focus on serving the market and helping lenders make mortgage credit available to qualified borrowers.” Reuters
