On Friday, December 16, 2011, the SEC announced that it had entered into non-prosecution agreements with the Federal National Mortgage Association ("Fannie Mae") and the Federal Home Loan Mortgage Corporation ("Freddie Mac") and filed charges against six of their former executives for securities fraud, alleging that "they knew and approved of misleading statements claiming the companies had minimal holdings of higher-risk mortgage loans, including subprime loans."

The SEC alleges that the executives caused their respective companies "to materially misstate their holdings of subprime mortgage loans in periodic and other filings with the Commission, public statements, investor calls, and media interviews" in an approximately 18-month period before August 2008.

Fannie Mae and Freddie Mac each agreed to accept responsibility for their respective conduct and not dispute, contest, or contradict the contents of an agreed-upon Statement of Facts, but did not admit or deny liability. Both companies agreed to cooperate with the SEC’s proceedings against the former executives. According to the SEC’s statement: "the Commission considered the unique circumstances presented by the companies’ current status, including the financial support provided to the companies by the U.S. Treasury, the role of the Federal Housing Finance Agency as conservator of each company, and the costs that may be imposed on US taxpayers."

The three Fannie Mae executives named in the lawsuit are former Chief Executive Officer Daniel H. Mudd, former Chief Risk Officer Enrico Dallavecchia, and former Executive Vice President of Fannie Mae’s Single Family Mortgage business, Thomas A. Lund. From Freddie Mac, the SEC sued former Chairman of the Board and CEO Richard F. Syron, former Executive Vice President and Chief Business Officer Patricia L. Cook, and former Executive Vice President for the Single Family Guarantee business Donald J. Bisenius. The SEC seeks permanent injunctions against future violations, director and officer bars, disgorgement, interest and penalties against each defendant.

The cases were filed in the Southern District of New York, where one (the case against former Freddie Mac executives) was assigned to Judge Richard Sullivan and the other (against the Fannie Mae executives) was assigned to Judge Andrew Carter. Neither case was assigned to Judge Rakoff (whose decision in the Citigroup matter was appealed by the SEC on December 15, as discussed here).