Fannie Mae-No Politics (FNMA)

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CLASS ACTION LAWSUIT:

I received this response from the law firm, below, in regard to a class action lawsuit against the government:

1. Our law firm has filed an action against the U.S. government on behalf of a proposed class of investors who held common and preferred stock in Fannie Mae and Freddie Mac on or before September 5, 2008, and still held those shares at the close of trading on September 5, 2008.

2. If you held shares on or before September 5, 2008, and still held those shares at the close of trading on September 5, 2008, you meet the current eligibility criteria and qualify to join the proposed class, but that could change if the classes are ultimately defined differently.

3. If you do not meet this eligibility criteria, you are not eligible to join. At this time, we do not expect that our action will include purchases of Fannie Mae or Freddie Mac at any other period.

4. If you are eligible to join our action (see #2 above) there is nothing you need to do for now. In the future, you will need to formally join or opt in to the action. A court-ordered notice program will occur at that point and will explain what additional action must be taken, and when.

5. Going forward, you will be able to find updates on the action's progress on our website (www.srkw-law.com).

6. The lawsuit alleges that prior to the U.S. Federal Government imposing conservatorships, Fannie Mae and Freddie Mac had operated successfully for decades. Then, the Federal Government took control of Fannie Mae and Freddie Mac away from shareholders and directed the companies to purchase subprime and other risky mortgages, leading to significant losses. The lawsuit also claims that the Federal Government unlawfully entered into stock agreements executed at the time of the conservatorships that established a grossly unfair lending arrangement by issuing the government senior preferred shares worth billions of dollars and gave the Federal Government a right to acquire nearly 80 percent ownership in both Fannie Mae and Freddie Mac, at a nominal exercise price of $0.00001 per share, rendering existing common and preferred stock in the companies nearly worthless. If you would like to know more about the claims brought in our action, please see the attached summary.

Lawfirms summary of Lawsuit:
On June 10, 2013, Spector Roseman Kodroff & Willis, PC (“SRKW”) filed a class action

on behalf of the common and preferred shareholders of Fannie Mae and Freddie Mac in the

United States Court of Federal Claims against the United States Government (Washington

Federal, et al. v. United States). The action alleges that the Government’s conduct in

placing Fannie Mae and Freddie Mac into conservatorship in 2008, as well as subsequent

actions the Government took in its role as conservator, caused substantial harm to the companies’ shareholders by

destroying their rights and obliterating the economic value of their shares. The class action seeks, among other relief, a

monetary judgment against the United States for its role in effectively nationalizing these private, shareholder-owned

corporations and failing to provide proper compensation to shareholders as required under the United States Constitution.

Fannie Mae and Freddie Mac are publicly traded companies owned by shareholders, not the Government, although they

were chartered by Congress and are subject to some regulation and oversight by the Government. As mandated by

Congress, Fannie Mae and Freddie Mac have guaranteed the vast majority of all new home mortgages in the United States

for decades. The companies performed well and were widely considered to be stable investments; the Government even

promoted Fannie Mae’s and Freddie Mac’s preferred shares to large financial institutions providing incentives to

encourage further investments in these shares. During the recent financial crisis, however, Fannie Mae and Freddie Mac

suffered losses, like virtually every other financial institution at that time. These losses stemmed, in significant part, from

risky mortgage investments they made under pressure from the Government to increase access to affordable housing, even

though this meant guaranteeing loans to borrowers with limited or unproved credit.

In July 2008, as the U.S. economy continued to decline, Congress enacted the Housing and Economic Recovery Act

(“HERA”), which established the Federal Housing Finance Agency (“FHFA”) as the chief regulator over Fannie Mae and

Freddie Mac and conferred upon FHFA greater regulatory authority over the companies than had ever been authorized

previously. Although the companies’ previous regulator had the authority to place the companies into conservatorship,

this authority under HERA was significantly expanded. Importantly, in pushing for the enactment of HERA, Government

officials, including then Treasury Secretary Henry Paulson, emphasized that this expanded authority was largely a

symbolic gesture to reinforce the public’s perception that Fannie Mae and Freddie Mac were stable and subject to proper

Two months later, however, on September 7, 2008, Secretary Paulson and the head of the FHFA publicly announced that,

at the “request” of the Government, the board of directors of each company “consented” that Fannie Mae and Freddie

Mac be placed into conservatorship, with FHFA acting as conservator. This news shocked the market, causing the value

of the companies’ common and preferred shares to plummet. Fannie Mae’s and Freddie Mac’s common shares

subsequently traded at less than $1.00 per share – down from over $7.04 per share and $5.10 per share, respectively,

immediately prior to the imposition of the conservatorship. The companies’ preferred shares traded at roughly 10-15% of

redemption value immediately following the imposition of the conservatorship.

The terms of the conservatorship were clearly one-sided. In exchange for the Treasury’s commitment to provide capital

as needed, each company issued to the Treasury $1 billion in senior preferred stock with a cumulative 10-12% dividend,

as well as common stock warrants representing a 79.9% ownership stake in each company. Further, the companies were

ordered to stop paying dividends to shareholders, delist their stock, and cease all shareholder communications. These

senior preferred stock agreements were amended several times and, in August 2012, the terms were amended such that, in

lieu of the percentage based dividend, the companies were forced to relinquish to the Government, on a quarterly basis, all

of their positive net worth (above a periodically diminishing capital reserve amount for the first five years). As the

companies have recently returned to profitability, this change in terms has resulted in a windfall to the Government at the

expense of the companies and their shareholders.

The class action complaint alleges that the Government’s conduct violated the constitutional rights of Fannie Mae’s and

Freddie Mac’s shareholders by taking private property (their shares in each company) for a public use without providing

just compensation and/or depriving shareholders of their property without due process. Specifically, the complaint alleges

that: (1) the conservatorships were improperly imposed because the statutory requirements for placing Fannie Mae and

Freddie Mac into conservatorship were not fully satisfied and, even if they were, the boards of directors of both

companies were coerced into consenting to the conservatorships; (2) the original terms of the conservatorships,

particularly regarding the senior preferred stock agreements, violated the constitutional rights of the companies’

shareholders; (3) the Government improperly used Fannie Mae and Freddie Mac to warehouse the toxic debts of other

major financial institutions and shore up the foundering economy at the expense of the companies’ shareholders; and (4)

the August 2012 amendment to the senior preferred stock agreements constituted a taking of private property to provide a

public economic benefit, for which just compensation was not provided. The complaint alleges that each of these actions

caused substantial economic harm to the companies’ preferred and common shareholders, resulting in tens of billions in

monetary losses, and seeks monetary relief on behalf of these shareholders.