WASHINGTON, DC-On Friday the Securities and Exchange Commission filed civil fraud charges against six former top executives at Fannie Mae and Freddie Mac. The SEC alleges that the executives knew that statements filed about the higher-risk and subprime loans contained in the agencies’ respective portfolios were misleading and approved them anyway. 

The six executives charged include former heads of both agencies: Fannie Mae’s former CEO Daniel H. Mudd; its former chief risk officer Enrico Dallavecchia; and former executive vice president of Fannie Mae's single-family mortgage business, Thomas A. Lund. Former Freddie Mac executives charged include former chairman of the board and CEO Richard F. Syron; former executive vice president and chief business officer Patricia L. Cook; and former executive vice president for the single-family guarantee business Donald J. Bisenius.
 
Mudd has responded to the charges, in a statement from his attorney provided to the media, by saying that the lawsuit “should never have been brought.” He said the government reviewed and approved all of the GSE’s financial disclosures. "The SEC is wrong, and I look forward to a court where fairness and reason -- not politics -- is the standard for justice,” he said in his statement.

According to news accounts, the Justice Department has also opened probes into Fannie Mae and Freddie Mac. The GSEs have accepted responsibility for its conduct in non-prosecution agreements with the SEC, but has not admitted or denied the charges. They are cooperating with the SEC in the cases against the six executives.

While these charges play out in the legal system, multifamily lenders and borrowers worry about the chilling affect it will have on the GSEs. Ever since Fannie Mae and Freddie Mac went under the government control, finding—and keeping--top talent for the agencies has been difficult.

Indeed, the top executives at the GSEs have routinely changed with many leaving after only serving a year or so in a position. In 2009, to name one example, Freddie Mac CEO David Moffett tendered his resignation less than six months after taking over the GSE. Earlier this year Freddie Mac CEO Charles E. "Ed" Haldeman, Jr., announced he would resign within the next year.