Fannie Mae, Freddie Mac: The Saga Continues

Fannie Mae and Freddie Mac were supposed to make the American Dream of home ownership an affordable reality for millions of hard-working families. Instead, Fannie and Freddie were seized by the federal government in 2008 to avoid a collapse of the mortgage market. Today, the two mortgage giants have collectively received $145 billion in bailout funds from the government. Then there’s the $355 billion worth of bad mortgages the two companies are expected to place on their balance sheets in the years ahead.

In the coming months that figure is expected to grow even bigger, as more people default on their mortgages. Taxpayers, meanwhile, will be on the hook for the debt that accumulates.

Then there’s the problem of Fannie Mae and Freddie preferred shares of stock. When Fannie Mae and Freddie Mac were taken over by the federal government in 2008, investors holding certain series of preferred stock lost big. The investors bought their preferred investments in Fannie and Freddie in good faith from investment firms like UBS and Citigroup. What they didn’t know when they purchased the preferred shares was the complete financial picture of Fannie Mae and Freddie Mac.

As it turns out, both companies were in a downward spiral financially. Part of the problem had to do with Fannie and Freddie’s risky lending practices, which included excessive leverage and investments in toxic derivative products.

Investors contend they never knew about that information. Moreover, they say the financial health of Fannie Mae and Freddie Mac wasn’t brought to their attention by the brokerages selling the preferred shares in the two companies. On Sept. 6, 2008, when the government took control of Fannie Mae and Freddie Mac, investors learned the truth. Their preferred stock holdings were wiped out.

If you are an institutional investor or retail investor and believe you were misled by a brokerage or investment firm regarding Fannie Mae or Freddie Mac preferred shares, we want to hear your story. You may have a viable claim for recovery of your investment losses by filing an individual securities arbitration claim with the Financial Industry Regulatory Authority (FINRA). Leave a message on the Contact Us form.