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Fannie Mae has agreed to forfeit $7.5 million

By James Tyson
Bloomberg News

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"Fannie Mae has entered into an agreement with the U.S. Department of Justice in regard to the First Beneficial forfeiture proceeding," company spokesman Chuck Greener said in an e-mail statement yesterday.

"This agreement brings a swift, appropriate and cooperative end for the United States and Fannie Mae in this matter."

Fannie Mae, the largest source of money for U.S. home mortgages, was ordered by a federal judge in October to forfeit $6.5 million for failing to inform the Government National Mortgage Association (Ginnie Mae), a government agency, about the sale.

The U.S. District Court in Charlotte, N.C., issued its order in a sealed ruling after concluding that Fannie Mae sold back fraudulent loans by First Beneficial of Charlotte, N.C., without notifying regulators of the fraud.

First Beneficial subsequently resold some of the loans to Ginnie Mae, which lost about $30 million as a result of the purchase.

Three U.S. lawmakers — Republicans on the House Financial Services Committee — asked Fannie Mae Chief Executive Officer Franklin Raines in a Dec. 1 letter to explain by Jan. 14 why the company failed to reveal the sale of the bogus loans.

They are U.S. Rep. Richard Baker, R-La.; Rep. Sue Kelly, R-N.Y.; and Rep. Robert Ney, R-Ohio.

The government-chartered company "was itself a victim of a mortgage fraud scheme perpetrated by the defendants," according to a consent order yesterday from the district court.

Copyright © 2004 The Seattle Times Company

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