MANHATTAN (CN) - The Federal National Mortgage Association (Fannie Mae) will pay $170 million to settle a class action alleging that its statements caused investor losses.
The Boston Retirement System, one of the court-appointed lead plaintiffs for a proposed common-shareholder class, heralded the case for achieving what a similar lawsuit against Federal Home Loan Mortgage Corp., better known as Freddie Mac.
"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," Boston Retirement chairman Daniel Green said in a statement.
In addition to Boston Retirement, the Southern District of New York had appointed the Massachusetts Pension Reserves Investment Management for the proposed common-shareholder class.
It had appointed the Tennessee Consolidated Retirement System as lead plaintiff for a proposed preferred-shareholder class.
Together these classes claimed that Fannie Mae and two of its former officers made false and misleading statements about Fannie Mae's internal controls and its exposure to subprime- and other risky mortgage-loan products, between Nov. 8, 2006, and Sept. 5, 2008.
Fannie Mae's true exposure to these risky assets finally came to light the Sept. 7, 2008, announcement by the company's regulator, the Federal Housing and Finance Agency (FHFA), that it had placed the company into conservatorship, capped off several partial disclosures.
Attorneys at Labaton Sucharow say the proposed $170 million settlement will benefit thousands of class members, if the court approves it.
Lead partner Thomas Dubbs noted in a statement that the "risks were indeed substantial."
The action is captioned as In re Fannie Mae 2008 Securities Litigation, 08-CV-7831.
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