The sec s complaint alleges that freddie mac engaged in a fraudulent scheme that deceived investors about its true performance, profitability, and growth trends. The fannie mae and freddie mac bailout occurred september 6, 2008. Freddie macs stock, debt and mortgage backed securities. But despite their many accomplishments, fannie mae and freddie mac are now essentially wards of the state and most policymakers. Access to the resources needed to report information to freddie mac in the accounting and payoff processes for multifamily mortgages and bonds. Presidentcoo david glenn chairmanceo leland brendsel excfo vaughn clarke former senior vice. The people responsible for fannie mae and freddie mac. Fannie mae and freddie mac hereafter the gses 1 provided the cornerstone of that system and deserve much of the credit for its success.
The congress of the united states charted freddie mac in the 1970s with the mission to provide stability, opportunities and affordability to the housing and rental markets. According to the complaint, freddie mac misreported its net income in 2000, 2001 and 2002 by 30. Freddie mac scandal freddie mac government sponsored. Fannie mae and freddie mac, the two governmentsponsored. Finance system, fannie mae, freddie mac, global markets 2015 duration. Freddie mac multifamily guide forms, and commonly used underwriting forms and other documents, are listed below. Since being nationalized, freddie has initiated programs to help homeowners avoid foreclosures. Vps robert dean and nazir dossani how they did itintentionally misstated and understated earnings. The rescue of fannie mae and freddie mac new york fed. Securities and exchange commission, civil action no. In december 2003 freddie mac, the federally chartered mortgage financing giant. Offering circular 6,000,000 shares freddie mac v 5. Accounting and management problems at freddie mac every crs.
This includes suspension of foreclosure sales and evictions of borrowers living in homes owned by the company as well as mortgage relief options. How do i find information about the freddie mac accounting. Report of the special examination of freddie mac fhfa. In september 2003, the treasury secretary john snow said. Federal home loan mortgage corporation june 16th, 2003 profit information background of fhlmc by. Fannie mae and freddie mac wont go to market until end of 2020, fhfa director says duration. Accounting fraud case study freddie mac scandal 2003 bagas septianto prabowo. They were federally backed mortgage realtors who where the people involved. Executive summary originally known as the federal home loan mortgage corporation, freddie mac was chartered by congress in 1970 as a private company with a public mission to stabilize the nations mortgage markets and widen opportunities for. The sec filed a civil fraud lawsuit friday against six former top executives at fannie mae and freddie mac, saying they misled investors about the subprimeloan risks they faced. The following june, ofheo office of federal housing enterprise oversight, freddie macs regulator, began an examination of freddie macs culture and the events leading up to the restatement. The rise and fall of fannie mae and freddie mac usc lusk. Essentially creating a secondary market that allowed for mortgage lenders to fund new mortgages, where in a way freddie mac continuously replenished funds available to homeowners. As a result, fannie and freddie were put into conservatorship by the federal housing finance agency fhfa.
The ongoing investigation into freddie mac looks like every other accounting scandal in recent years. Three top executives at freddie mac are out the new york. March 31, june 30, september 30 and december 31, beginning december 31, 2001 dividend adjustment. Freddie mac 2003 income was intentionally misstated. Essay freddie mac ethics home mortage business, low. Freddie macs singlefamily fraud risk sffr team is at the forefront of prevention, detection, investigation, reporting and resolution of mortgagerelated fraud and other suspicious activity. Sec charges exfannie mae, freddie mac ceos the mortgage giants had to be taken over by the government in 2008 and then propped up by taxpayers.
Freddie mac accounting scandal by kayla hudak on prezi. Journal of financial crime fannie mae and freddie mac. In healthier times, residential construction comprised 5% of the economy. Freddie mac as of yesterday, the office of federal housing enterprise oversight, the u. Risk at freddie mac stanford graduate school of business. The problems began at freddie mac in the wake of the enron scandal, which. New york cnnmoney freddie mac is in the spotlight of the republican presidential contest, as mitt romney attacks newt gingrich for his 2006. Freddie mac settles accountingfraud charges business.
For the nscal year ended december 31, 2003 freddie mac is a stockholderowned, governmentsponsored enterprise, or gse, established by congress to provide a continuous oow of funds for residential mortgages. Freddie mac settles accountingfraud charges business us. Fannie mae, freddie mac, housing finance, financial crisis. Introduction fannie mae, the federal national mortgage association, and.
President and chief operating officer david glenn exchief financial officer vaugh clarke senior vice presidents robert dean senior vice president nazir dossani. Freddie mac, the big buyer of mortgage loans, fired its president yesterday, contending that he failed to cooperate with an internal investigation into its accounting practices. Accounting and management problems at freddie mac accounting and management problems at freddie mac mark jickling specialist in financial economics government and finance division summary for most of 2003, freddie mac, one of the two governmentsponsored enterprises gses that dominate the secondary market for home mortgages, was embroiled in a controversy over improper accounting. The federal home loan mortgage corporation fhlmc, known as freddie mac, is a public governmentsponsored enterprise gse, headquartered in tysons corner, virginia. The board was throttled for its acquiescence to the accounting manipulation in a 2003 report by armando falcon jr. The name fannie mae is perhaps one of the most popular corporate names among united states households, but. Freddie mac, the office of federal housing enterprise oversight began to examine fannie maes accounting practices. Ceo of freddie mac from december 2003 until september 7, 2008, when freddie macs regulator, the federal housing finance agency fhf a, placed it. Executive summary in the early 1990s, freddie mac promoted itself to investors as steady freddie, a company of strong and steady growth in profits.
On january 22, 2003, freddie mac announced it would restate earnings for 2002, 2001, and possibly 2000. Month xx, 2012 federal housing finance agency office of inspector general federal housing finance agency office of inspector general. Recent events have brought this issue into sharp focus beginning with the enron scandal in 2001 and more. The first event was the gse accounting scandal of the late 1990s that resulted. Evaluation of fhfas oversight of freddie macs repurchase settlement with bank of america. On january 22, 2003, freddie mac announced that the enterprise would restate its. Exactly four years ago, during the early days of the financial crisis, the federal government took control of mortgage financiers fannie mae and freddie mac through a legal process called.
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