Morning Brief: Fannie, Freddie Knew Of Risks

We begin today with more news from the mortgage giants Fannie Mae and Freddie Mac. Staff writer Zachary Goldfarb reports that internal Freddie documents show senior executives at the company were warned years ago they were offering mortgages that could pose dangers to the firm.

At Fannie, top executives were told it was necessary to develop "underground" efforts to buy subprime mortgages because of competitive pressures, although there were growing risks and borrowers often didn't understand the terms of the loans, documents Goldfarb obtained show.

The House Committee on Oversight and Government Reform, which has the documents, is holding a hearing today to discuss Fannie and Freddie's downfall. The companies were seized by the government three months ago after nearly collapsing in the wake of billions of dollars of losses on mortgages.

In foreclosure news, staff writer Nick Miroff reports that the rental market has gotten haphazard, particularly for those who have been foreclosed upon.

"In the past 18 months, the foreclosure debacle has pushed tens of thousands of area residents into the rental market, many with crippled credit and a desperate need for housing. Waiting for them is a new cast of swindlers, cheats and real estate sharks ready to prey on the weak and needy. Scams of various stripes are thriving in the foreclosure mess and flourishing at the margins of landlord-tenant laws," Miroff writes.

He also notes that while rental scams have generally been more of an urban problem, the high incidence of foreclosure in the Washington region's suburbs and the relative lack of tenants' rights organizations there have helped create areas of vulnerability in such places as Prince William County.

And in biotech news, Human Genome Sciences, a Washington area company that in 16 years has yet to bring a commercial treatment to market, said on Monday that results were positive for the first of two late-stage clinical trials of its hepatitis C drug.

The Rockville company is developing the drug, Albuferon, with Swiss drugmaker Novartis.

The results showed that Albuferon was as effective for hepatitis C as the current treatment on the market, a Roche drug called Pegasys, but in half as many doses. The test focused on patients who had two types of hepatitis C, both of which take 24 weeks to treat.

By Alejandro Lazo  |  December 9, 2008; 8:08 AM ET  | Category:  Economy Watch , Fannie Mae , Freddie Mac , Morning Brief
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Comments

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I'm sure there are written warnings and critiques of every decision the executives have ever made, including where to hold the company picnic.

Of course there was dissent...

Posted by: JkR- | December 9, 2008 9:42 AM

Everybody already know the truth, so is Mr. Waxman trying to whitewash the Democratic Party from the Housing market collapse, and the world financial crisis? Will he blame Bush, and not Barney Frank or Chris Dodd? What about Raines, who the Black Caucus protected from the regulators? Truth and prosecution, not another cover up.

Posted by: xthat | December 9, 2008 6:55 PM

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