The parties in the case of U.S. Securities and Exchange Commission v. Mudd
in the U.S. District Court have agreed to settle the regulator’s
suit against Former Fannie Mae Chief Daniel Mudd. The Securities Exchange
Commission (“SEC”) alleged that Mudd and other executives
misled the public about the mortgage buyer’s exposure to subprime
loans. The case was set for trial in November.
Under the agreement, accepted by U.S. District Judge Paul A. Crotty, Fannie
Mae will pay the government $100,000 on behalf of Mudd, without him admitting
wrongdoing. Last year, Mudd’s co-defendants, former Fannie Mae executives
Enrico Dallvecchia and Thomas Lund, settled with the SEC for $25,000 and
As part of the settlement, the SEC may revive the suit if Mudd commits
any securities violations within the next 12 months. The parties agreed
that the case had gone on long enough, and it was not in the “interest
of justice” to continue litigation.
The original suit was filed in December 2011, where the SEC claimed that
Mudd and other associates purposefully underestimated the volume of subprime
loans it had owned before the mortgage crash of 2008.
Mudd had sought summary judgment in the case, but Judge Crotty denied the
motion back in February, stating there was enough sufficient evidence
to allow a jury to find that Fannie Mae disclosures were misleading. More
recently, the court blocked certain “experts” from testifying
in the trial, stating that their testimony may only serve to confuse the jury.
The SEC also brought claims against Freddie Mac executives for underreporting
the amount of risky loans they held. The Freddie Mac case was settled
in 2015, when former executives Richard Syron, Patricia Cook, and Donald
Bisenius agreed to Freddie paying $250,000, $50,000, and $10,00, respectfully.
The SEC is still working through several other high-profile suits that
involve banks misrepresenting the amount of toxic debt that went into
their Residential Mortgage Backed Securities. In a historical case, Bank
of America agreed to pay $16.65 billion to resolve state and federal claims
that the bank acted inappropriately in its handling of mortgages leading
up to and during the economic crisis.
The settlements are part of ongoing efforts by the Financial Fraud Enforcement
Task Force and its Residential Mortgage-Backed Securities (RMBS) Working
Group to uncover bank and mortgage fraud. The federal task force has recovered
over $36 billion in penalties since its inception.
Contact Geraci Law Firm at (949) 298-8050 today, for more information. Learn more about
Dennis Baranowski by reading his bio.