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On September 7, 2008, federal regulators seized control of Freddie Mac.
However, as early as 2004, The Federal Home Loan Mortgage Company (“Freddie Mac”) was the subject of warnings that the Company was taking on excessive risk in subprime and Alt-A loans. Both the Wall Street Journal and the New York Times reported that in mid 2004 it was widely known that Freddie Mac’s underwriting standards were becoming “shoddy” and that the Company’s lending practices “would likely pose an enormous financial and reputational risk to the Company.”
In November 2007, Freddie Mac announced a third quarter loss of $2 billion due to the Company’s “deteriorating mortgage portfolio.” In a November 20, 2007 conference call with securities analysts, the Company stated that it was expecting a $10 to $12 billion in credit losses in 2008 and 2009. Subsequently, OFHEO reported that Freddie Mac “had fallen below the capital level required to maintain safety and soundness and was in danger of being ordered to cease and desist buying mortgages until it replenished its capital base.
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