US judge tosses lawsuit against Freddie Mac
WASHINGTON (AP) — A federal judge has tossed out a lawsuit against Freddie Mac that accused the mortgage giant and three top executives of understating the level of risky mortgages the company held before the housing bubble burst.
U.S. District Judge John Keenan in New York City dismissed the class-action suit filed by several shareholders accusing Freddie Mac and the former executives of civil securities fraud. Keenan said the company reported full and accurate information to investors during the period in question, from Nov. 20, 2007, to Sept. 7, 2008.
The Securities and Exchange Commission filed charges in December alleging similar violations against Freddie Mac, its sibling Fannie Mae and six former executives of the companies. That suit is still pending.
The government rescued Fannie and Freddie in 2008 after they incurred massive losses on risky mortgages. Taxpayers have spent about $170 billion to rescue the companies.
Keenan dismissed the suit with prejudice, meaning that the claims cannot be raised again. The suit was originally filed in August 2008. Keenan had dismissed an earlier version of the lawsuit in April 2011, and the plaintiffs filed a revised suit. Keenan's ruling, which was made Monday, was announced by McLean, Va.-based Freddie on Thursday.
The executives named in the suit are former Freddie CEO Richard Syron, former chief financial officer Anthony Piszel and former chief business officer Patricia Cook.
The pension funds that held Freddie stock and filed the suit alleged that Freddie and the executives understated the company's exposure to high-risk mortgages and overstated its capital reserves. The stock price fell when information about Freddie's true financial picture "leaked out," the suit said.
Fannie and Freddie buy home loans from banks and other lenders, package them into bonds and then sell them to investors around the world. The two companies own or guarantee about half of all U.S. mortgages, or nearly 31 million loans.