FHFA Issues Subpoenas In Private-Label MBS Investigation

deral Housing Finance Agency (FHFA) has issued 64 subpoenas to various entities, seeking documents related to private-label mortgage-backed securities (MBS) in which Fannie Mae and Freddie Mac have invested. The documents will enable the FHFA to determine whether the MBS issuers and others are liable to the government-sponsored enterprises (GSEs) for certain losses they have suffered on these securities. In a [link=http://www.fhfa.gov/webfiles/15935/PLS_subpoena_final__7_12_10.pdf]press statement[/link] issued this morning, the agency said that the GSEs have attempted to determine whether misrepresentations, breaches of warranties or other acts or omissions by counterparties would require repurchase of loans underlying the securities by the counterparties and whether other remedies might be appropriate. However, due to difficulty by the GSEs in obtaining the loan documents, the FHFA issued subpoenas to the trustees and servicers controlling or holding these documents. ‘FHFA is taking this action consistent with our responsibilities as conservator of each enterprise,’ said FHFA Acting Director Edward J. DeMarco. ‘By obtaining these documents, we can assess whether contractual violations or other breaches have taken place leading to losses for the enterprises and, thus, taxpayers. If so, we will then make decisions regarding appropriate actions.’ Congress provided FHFA with broad subpoena authority in the Housing and Economic Recovery Act of 2008. SOURC


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