Two Largest Mortgage Lenders Admit Being Under SEC, DOJ Probe

Washington, D.C. (AHN) - The two largest mortgage lenders seized by the United States federal government are now admitting they are under investigation by the Department of Justice and the Securities and Exchange Commission.

Fannie Mae and Freddie Mac said the SEC and the U.S. Attorney for the Southern District of New York are going over their accounting, disclosure and corporate governance documents related to events from Jan. 1, 2007. Subpoenas have been issued by a federal grant jury to the two mortgage firms, while the SEC ordered them to preserve their documents.

The two firms got letters from the two government agencies Friday informing them of the investigation. Both firms said they will cooperate with the ongoing probe.

According to Bryan Sillaman, a lawyer who used to be with the SEC's Enforcement Division, the investigation is probably not focused too much, and federal officials will probably request a broad set of documents to see if they find evidence of misconduct by the executives of Fannie and Freddie.

Frank Razzano, another ex-SEC lawyer, added that the mood in the country over the current financial crisis was putting pressure on the FBI, the SEC and the Justice Department to hold the officers, directors and employees of companies, such as Fannie and Freddie, responsible for the current financial mess.