Tuesday, August 15, 2023 12:03:49 PM
August 15, 2023 - Dennis Hollier - dhollier@imfpubs.com
After years of legal defeats, shareholders in the government-sponsored enterprises won a lawsuit challenging the 2012 net worth sweep.
Monday a jury in the District Court for the District of Columbia found that the Federal Housing Finance Agency violated its duty as conservator of the GSEs when it agreed to the net worth sweep in 2012.
The verdict in Berkley v. FHFA requires Fannie Mae and Freddie Mac to pay junior preferred shareholders $299.4 million and $281.8 million, respectively. In addition, the jury carved out $31.4 million for the owners of Freddie common shares.
Almost all of the legal setbacks in the multitude of shareholder lawsuits against FHFA and the Treasury Department in the past 10 years were based on technicalities, such as standing and jurisdictional matters. That includes the 2021 Supreme Court ruling in Collins v. Yellen, which left the net worth sweep standing.
It remains to be seen whether FHFA will appeal the jury’s verdict.
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