The federal regulator of Fannie Mae and Freddie Mac on Monday said it is seeking to determine if issuers of private mortgage bonds are liable for losses suffered by the two housing finance giants.
The Federal Housing Finance Agency said it issued 64 subpoenas to various entities, asking for documents on the mortgage securities assembled outside the government-related home finance system.
Names of subpoenaed parties were not released, but the biggest private mortgage bond issuers are among the top Wall Street banks.
Fannie Mae and Freddie Mac in the mid-2000s rapidly ramped up purchases of the so-called private-label mortgage-backed securities pumped out by Wall Street. The securities, including subprime mortgage bonds, represented some of the worst underwriting standards and helped trigger the credit crisis.
The FHFA said it stepped in because Fannie Mae and Freddie Mac have found it difficult to obtain loan documents necessary in their own investigations of possible misrepresentations or breaches of warranties. The private mortgage bonds became a significant portion of the companies portfolios, supplementing the guaranteed securities they issued and purchased.
The deterioration in credit of subprime and other private mortgage bonds was key to Fannie Mae's and Freddie Mac's rapid downfall in 2008, leading the regulator to seize control that September. Since then, the U.S. Treasury has injected more than $145 billion to keep the companies afloat.
If liability is determined, the FHFA said it expects to recoup funds and use them to offset the taxpayer injections.
The FHFA in a statement said no entity is targeted, and that it would be premature to speculate on how information will be used, including potential lawsuits.
Fannie Mae and Freddie Mac have already started recouping billions of dollars from lenders on loans that did not meet underwriting guidelines for agency mortgage-backed securities issued by the two government-controlled companies.
(Editing by Kenneth Barry)