Internal Warnings Sounded on Loans At Fannie, Freddie

[Eugene]

Source: Washington Post

Internal Warnings Sounded on Loans At Fannie, Freddie
Executives Were Told of Subprime Risk

By Zachary A. Goldfarb
Washington Post Staff Writer
Tuesday, December 9, 2008; Page D01

Internal Freddie Mac documents show that senior executives
at the company were warned years ago that they were
offering mortgages that could pose dangers to the firm,
hurt borrowers and generate more risky loans throughout
the industry.

At Fannie Mae, top executives were told it was necessary
to develop "underground" efforts to buy subprime mortgages
because of competitive pressures, although there were
growing risks and borrowers often didn't understand the
terms of the loans, documents show.

The House Committee on Oversight and Government Reform,
which has the documents, is holding a hearing today to
discuss Fannie and Freddie's downfall. The companies were
seized by the government three months ago after nearly
collapsing in the wake of billions of dollars of losses
on mortgages.

In a memo to former Freddie chief executive Richard F.
Syron and other top executives, former Freddie chief
enterprise risk officer David Andrukonis wrote that the
company was buying mortgages that appear "to target
borrowers who would have trouble qualifying for a
mortgage if their financial position were adequately
disclosed."

-snip-

Read more: http://www.washingtonpost.com/wp-dyn/content/article/2008/12/08/AR2008120803570.html

[soothsayer]

1. fan and fred don't offer loans; they buy loans that mortgage originators sell to the public.

and they are chartered by congress to buy loans that support affordable housing (riskier loans from the less credit worthy) so i still don't see how they deserve all the blame.

[pam4water]

2. Was it congress or the the Bush administration that forced them

to buy the bad loans?