Federal Home Loan Mortgage Corporation (Freddie Mac) (NYSE: FRE) Investor Securities Class Action Lawsuit 11/21/2007

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Company Name(s): 
Federal Home Loan Mortgage Corp.(Freddie Mac)
Case Name: 
Federal Home Loan Mortgage Corp.(Freddie Mac) Shareholder Class Action Lawsuit 11/21/2007
Case Status: 
Lawsuit Filed
Case Status: 
Case Dismissed
Affected Securities
NYSE: FRE
Lawsuit Overview
Type of Lawsuit: 
Shareholder Class Action
Date Filed: 
11/21/2007
Class Period Begin: 
08/01/2006
Class Period End: 
11/19/2007
Court of Filing: 
U.S. District Court for the Northern District of Ohio
Case Dismissed: 
10/31/2014
Summary: 

October 31, 2014 - The court granted the defendants' motions to dismiss, dismissing the case with prejudice and denying lead plaintiff leave to file a fourth amended complaint.

October 8, 2013 - The defendants filed motions to dismiss.

March 28, 2012 - The lead plaintiff filed a third amended complaint.

April 6, 2009 - The defendants filed a motion to dismiss.

November 7, 2008 - The lead plaintiff filed a second amended complaint.

September 2, 2008 - The defendants filed a motion to dismiss.

May 27, 2008 - The lead plaintiff filed an amended complaint.

April 10, 2008 - The lead plaintiff and lead counsel were appointed.

March 10, 2008 - The plaintiff that filed the November 21, 2007 complaint filed a notice of voluntary dismissal.

January 22, 2008 - Lead plaintiff motions were filed.

January 18, 2008 - Another investor filed a complaint in the U.S. District Court for the Northern District of Ohio on behalf of investors who purchased Federal Home Loan Mortgage Corporation (Freddie Mac) (NYSE: FRE) common shares between August 1, 2006 and November 23, 2007.

November 21, 2007 - An investor in shares of Federal Home Loan Mortgage Corporation (Freddie Mac) (NYSE: FRE) filed a lawsuit in the U.S. District Court for the Northern District of Ohio against Federal Home Loan Mortgage Corporation (Freddie Mac) over alleged violations of Federal Securities Laws in connection with certain allegedly false and misleading statements made between August 1, 2006 and November 20, 2007.

The complaint charges Federal Home Loan Mortgage Corporation (Freddie Mac) and certain of its officers and directors with violations of the Securities Exchange Act of 1934. Freddie Mac is a shareholder-owned company established by Congress in 1970 to support homeownership and rental housing.

The complaint alleges that between August 1, 2006 and November 20, 2007 defendants made false and misleading statements concerning Freddie Mac’s business, its risk management and the procedures it put in place to protect Federal Home Loan Mortgage Corporation from problems in the mortgage industry. In fact, between August 1, 2006 and November 20, 2007, Freddie Mac was not adequately implementing risk control measures. Moreover, Federal Home Loan Mortgage Corporation’s procedures for appraisals led to many inflated appraisals, increasing the risk of defaults. Ultimately, Federal Home Loan Mortgage Corporation reported billions of dollars in losses, has been mentioned in investigations by the New York Attorney General and announced it must raise new capital to meet regulatory requirements. On this news, Freddie Mac stock (NYSE: FRE) fell over $10 per share to close at $26.74 on November 20, 2007.

According to the complaint defendants concealed the following information, which caused their statements to be materially false and misleading: (a) defendants were not implementing sufficient risk management controls to protect Federal Home Loan Mortgage Corporation from acquiring billions of dollars worth of mortgages with poor underwriting standards, causing Federal Home Loan Mortgage Corporation to have an untenable amount of risky loans; (b) defendants were not implementing controls to ensure that appraisals were done appropriately and to prevent collusion between lenders and appraisers, increasing the risk of defaults; (c) Federal Home Loan Mortgage Corporation was not adequately reserving for uncollectible loans, causing its financial results to be misleading; and (d) Federal Home Loan Mortgage Corporation had billions of dollars of bad loans which it would eventually have to write off, causing losses and capital deficiencies.