© 2024 Iowa Public Radio
Play Live Radio
Next Up:
0:00
0:00
0:00 0:00
Available On Air Stations

Investors Want a Piece of Fannie and Freddie

Dale Calder
Adjustable-rate mortgages lead to the subprime mortgage crisis. This practice played a large part in Fannie Mae and Freddie Mac’s 2008 insolvency. ";

Urbandale’s Continental Western and other investors in Fannie Mae and Freddie Mac aren't receiving dividend checks since all profits from the mortgage lenders are being turned over to the U.S. Treasury. 

If the federal government hadn’t spent $187 billion to bail out Fannie Mae and Freddie Mac during the 2008 Financial Crisis, the mortgage giants would have tanked.

Today Fannie and Freddie are making billions, under a conservatorship with the Federal Housing Finance Agency (FHFA.)

Originally, 10 percent of Fannie-Freddie-dividends went to the federal government. But in 2012 the FHFA decided all the profits would go to the government.

Continental Western is challenging the FHFA in federal district court saying the decision to take 100 percent of the profits is an abuse of the agency's role as a conservator.  

The company's team of lawyers includes former GOP senate candidate Matt Whitaker and famous litigator Charles Cooper. In 2013 Cooper defended Proposition 8, California's ban on same-sex marriage in front of the U.S. Supreme Court. 

Tim Pagliara is the executive director of Tennessee-based Investors Unite, which represents investors of Fannie and Freddie. He says the 2012 arrangement isn’t fair. 

"They’ve nationalized the housing industry," says Pagliara. "This is what Chavez did to the oil companies in Venezuela….we don’t operate like that in this country."

The Department of Justice declined to comment. However today at Des Moines U.S. District Courthouse, DOJ lawyer Howard Cayne says since Fannie and Freddie are under the conservatorship investors have no legal recourse.

Cayne says conservators are allowed administrate businesses as they see fit, even if that means liquidation. 

U.S. District Judge Robert Pratt for the Southern District of Iowa has yet to rule on Continental Western's right to challenge the FHFA. 

Earlier this year U.S. District of Columbia Judge Royce Lamberth threw out a similar lawsuit.