WASHINGTON (10/28/14)--Fannie Mae will pay $170 million to shareholders to settle a consolidated class action lawsuit alleging the government-backed lending agency failed to represent the full extent of its exposure to subprime loans that played a large role in causing the housing crisis, according to documents filed in New York federal court last week (Law360.com Oct. 24).
The common and preferred stockholders who filed the complaint filed a motion of preliminary approval of the settlement Friday. The agreement would clear Fannie Mae, in addition to Federal Housing Finance Agency officials, of allegations that it had broken the Securities Exchange Act of 1934, according to Law360.
Nearly three-quarters of the settlement amount will go to the Massachusetts Pension Reserve Management Board and State Boston Retirement Board, which represent the common stockholders, and about 25% will go to the Tennessee Consolidated Retirement System, which represents the preferred stockholders.
The plaintiffs have released a statement that they are pleased with the settlement, especially after a similar complaint against Freddie Mac was recently dismissed.
"Unlike the plaintiffs in the Freddie Mac case, we were able to successfully allege that investors' losses were caused by Fannie Mae's statements and actions rather than by the financial crisis," said Daniel J. Greene, board chair of the State Boston Retirement Board (Law360.com). "The Boston retirement system believes it's important to prosecute securities class action cases such as this one in order to protect the assets that it holds for its members and retirees."