FHFA, as Conservator of Fannie Mae and Freddie Mac (the Enterprises), has issued 64 subpoenas to various entities, seeking documents related to private-label mortgage-backed securities (PLS) in which the two Enterprises invested. The documents will enable the FHFA to determine whether PLS issuers and others are liable to the Enterprises for certain losses they have suffered on PLS. If so, the Conservator expects to recoup funds, which would be used to offset payments made to the Enterprises by the U.S. Treasury.

Fannie Mae and Freddie Mac share the critical mission of providing liquidity and stability to the Nation’s secondary mortgage market. On September 6, 2008, FHFA placed both Enterprises into conservatorship with the purpose of preserving and conserving Enterprise assets.

Before and during conservatorship, the Enterprises sought to assess and enforce their rights as investors in PLS, in an effort to recoup losses suffered in connection with their portfolios. Specifically, the Enterprises have attempted to determine whether misrepresentations, breaches of warranties or other acts or omissions by PLS counterparties would require repurchase of loans underlying the PLS by the counterparties and whether other remedies might be appropriate. However, difficulty in obtaining the loan documents has presented a challenge to the Enterprises’ efforts. FHFA has therefore issued these subpoenas for various loan files and transaction documents pertaining to loans securing the PLS to trustees and servicers controlling or holding that documentation.

“FHFA is taking this action consistent with our responsibilities as Conservator of each Enterprise,” said FHFA Acting Director Edward J. DeMarco. “By obtaining these documents we can assess whether contractual violations or other breaches have taken place leading to losses for the Enterprises and thus taxpayers. If so, we will then make decisions regarding appropriate actions.”

Congress provided FHFA with broad subpoena authority in the Housing and Economic Recovery Act of 2008. FHFA anticipates full compliance with the subpoenas but is prepared to take appropriate action to ensure compliance, if necessary.

According to an article on Bloomberg.com, Joshua Rosner, an analyst who in 2007 predicted the collapse in the market for securities, claims that Fannie and Freddie's regulator may identify as much as $30 billion of debt included in mortgage bonds that the companies can force sellers to repurchase.