No Criminal Charges For Freddie Mac

Mortgage finance giant Freddie Mac will not face criminal charges in connection with its multibillion-dollar accounting scandal, the company said Tuesday.

The Justice Department began investigating the accounting of the government-sponsored company, which is the second-largest financer of home loans in the country, after Freddie Mac disclosed in June 2003 that it had misstated earnings by some $5 billion,  mostly underreported,  for 2000-2002.

The investigation is said to have been inactive for two years. Freddie Mac officials say the company has not been contacted by anyone in the U.S. attorney's office in Alexandria, Va., which had been conducting the inquiry, and that they understand the investigation to be closed.

"It is Freddie Mac's understanding that it is the practice of the U.S. attorney's office for the Eastern District of Virginia neither to issue official notices nor to confirm publicly the conclusion of an investigation," company spokesman Doug Duvall said in a statement. "However, the U.S. attorney's office has not initiated contact with us in well over two years and it is our understanding that the matter is inactive. Accordingly, we expect no further action in this matter."

Jim Rybicki, a spokesman for U.S. Attorney Chuck Rosenberg in Alexandria, declined to comment.

It is not known whether the Securities and Exchange Commission will bring civil charges against Freddie Mac or company executives, with the burden of proof less stringent than in criminal prosecutions. SEC spokesman John Nester declined comment Tuesday.

The apparent end of the criminal investigation was first reported in Tuesday's editions of The Washington Post.

Last month Fannie Mae, Freddie Mac's larger sibling in the $8 trillion home-mortgage market, announced _ and the Justice Department confirmed _ that the criminal investigation against it had been ended after two years. Fannie Mae, whose accounting scandal came to light in September 2004, has been ordered by the SEC to restate its earnings back to 2001 _ a correction expected to reach around $11 billion.

Fannie Mae reached a civil settlement in May with the SEC and the Office of Federal Housing Enterprise Oversight, agreeing to pay a record $400 million fine after OFHEO found serious accounting problems and earnings manipulation by the company.

The disclosure of accounting irregularities at McLean, Va.-based Freddie Mac brought the ouster of its top executives in mid-2003: then-chief executive Leland Brendsel, president David Glenn and chief financial officer Vaughn Clarke. The company paid a $125 million civil fine in December 2003 _ a record at the time _ in a settlement with OFHEO, which blamed management misconduct for the faulty accounting.

The Post, citing unnamed sources familiar with the investigation, reported that the prosecutors' examinations of Brendsel, Glenn and Clarke also are inactive. Attorneys representing the three former executives didn't immediately return telephone calls from The Associated Press.

OFHEO spokeswoman Stefanie Mullin said Tuesday that the agency "is pursuing enforcement actions against former Freddie Mac executives." She did not identify them and declined further comment.

Freddie Mac and Fannie Mae were created by Congress to pump money into the home-mortgage market by buying home loans from banks and other lenders, to keep interest rates low and make home ownership affordable for low- and moderate-income people. They bundle the mortgages into securities for sale on Wall Street.

technorati tags:mortgages, home+loans, freddie+mac, fannie+mae

What Is A Reverse Mortgage?

I just like to address this question about reverse mortgages again.

A reverse mortgage is a mortgage that is geared to the elderly homeowners out there. This type of mortgage will allow them to use some or all of the equity that they have built up into their home over the years. Those that need funds to pay for medical bills, for long term care or to make improvements on their home can usually use the equity in their home to make these improvements. These loans are somewhat different than the conventional mortgage though.

To qualify for the reverse mortgage, you need to be at least 62 years of age. There are no credit or employment verifications. Some homes, such as those that are mobile homes, do not necessarily qualify for this type of loan because they may not be worth as much. The mortgage is taken out on the equity of the home. Equity is a term that describes the value of the home minus any mortgages or liens that are being held against it. The equity of a home goes up as the mortgage of the home is paid down. When the home is completely paid off, the equity of the home is the same as the home’s value on the market.

Reverse Mortgages Gaining Popularity in the US

The maturing baby boomer market is pushing growth for reverse mortgages in the USA. According to Mortgage Loan Place, Reverse Mortgages are now being offered to help our nation’s older citizens, who are often in need of cash to pay for medications, food, and other living expenses. A perfect solution for someone needing a larger monthly income, a reverse mortgage can turn the financial situation of senior citizens around.

In response to their growing popularity, Mortgage Loan Place has begun offering reverse mortgages to qualified senior citizens. In previous years, only about 50,000 reverse mortgages were acquired, but this figure is expected to rise dramatically as the "baby boomer" generation gets older. Many see reverse mortgages as the new key to making the assets of senior citizens more accessible.

The way reverse mortgages work (and why they’ve become so popular) is by increasing the liquidity of a senior citizen’s assets. For many older Americans, cash is hard to come by, even though they live in a paid-off house. With a reverse mortgage,the lender pays the homeowner money based on the mortgage payments that have been made over what is usually many years. And, in what is perhaps the most appealing aspect of a reverse mortgage, the owner continues to live in the house while receiving monthly payments or a line of credit. Furthermore, the lender cannot take away the home if the homeowner outlives the loan, you do not need to repay the loan until you no longer live in the house, and you can never owe more than your home’s value.

To be eligible for a reverse mortgage, applicants must be at least 62 years of age, own the home they live in (or have a low mortgage balance), and that home must be a single family house, a two-to-four unit property, townhouse, or a certain type of condominium. After being accepted for a reverse mortgage, senior citizens have three choices for borrowing on their home equity: lifetime monthly payments, a large lump sum, or a credit line (now available in all states).

The amount that applicants receive depends largely on their age, value of property, and whether there is a remaining balance on the mortgage. Typically, the older the applicant, the larger the monthly sum or line of credit will be.

So now you can see the benefits of a reverse mortgage.