Calif. attorney general subpoenas mortgage giants

AP News
Posted: Nov 17, 2011 5:57 PM
Calif. attorney general subpoenas mortgage giants

California's attorney general has subpoenaed mortgage giants Fannie Mae and Freddie Mac looking into their lending practices in the state, a person familiar with the matter told The Associated Press on Thursday.

The subpoenas were issued to the two firms as part of a state investigation, the person told AP on condition of anonymity because he wasn't authorized to talk about it publicly.

Lynda Gledhill, a spokeswoman for Attorney General Kamala Harris, declined comment. Representatives for Fannie Mae and Freddie Mac also did not comment.

State investigators will be looking at Freddie and Fannie's involvement in more than 12,000 foreclosed properties in California where they served as landlords, according to the Los Angeles Times, which first reported the story. They also want to find out what role the two agencies played in selling or marketing mortgage-backed securities, the newspaper reported.

The issuance of subpoenas is the latest move by Harris to examine the actions within the mortgage industry that decimated California's housing market and led to a wave of foreclosures.

Harris has created a task force that is pursuing criminal charges and civil judgments in mortgage fraud cases.

She also recently announced that her office would not agree to a planned 50-state settlement over foreclosure abuses that federal officials and other state attorneys general are negotiating with major U.S. banks. She called the deal "inadequate for California homeowners," arguing that it gave bank officials too much immunity from civil litigation.

The nationwide talks have been designed to institute new guidelines for mortgage lending, which came under scrutiny after some homeowners were improperly foreclosed upon using faulty paperwork.

Earlier this month, Harris called upon Ed DeMarco, the acting director of the Federal Housing Finance Agency, which regulates Fannie and Freddie, to allow larger reductions of principal to help struggling homeowners.

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The government rescued the pair of mortgage titans in 2008 after they nearly collapsed because of huge losses on risky mortgages they bought. Taxpayers have spent about $170 billion to rescue them, the most expensive bailout of the recent financial crisis.

Officials estimate the bailout could reach up to $220 billion through 2014.

This week, the House Financial Services Committee approved legislation that would suspend tens of millions of dollars in executive compensation packages at Fannie and Freddie and stop future bonuses.

A dozen executives at the firms received roughly $35.4 million in total salary and bonuses in 2009 and 2010. Fannie Mae CEO Michael J. Williams received about $9.3 million for the two years. Freddie Mac CEO Edward Haldeman Jr. was paid $7.8 million for the same period.