Fannie Facing Possible $7B Exposure In Alleged Improper Escrow Grab

Bloomberg News ran a story last week on a Federal lawsuit that has been bouncing around in a Texas Federal court for about four years in which Fannie Mae has been accused of improperly pocketing the interest income from property owners' escrow accounts relating to Federally insured mortgages dating back to the 1970s. According to the story:

• Fannie Mae, the largest source of U.S. home-loan money, faces a proposed class-action lawsuit over as much as $7 billion it earned on property owners' escrow accounts starting in the 1970s. The company violated government policy and breached its duty to about 4,000 owners of government insured moderate- and low-income housing, lawyer Mark Lanier claims in federal court in Texarkana, Texas. Fannie Mae should return gains of $3 billion to $7 billion, said Lanier, 47, with the Houston-based Lanier Law Firm. The higher figure is $7.20 a share, 24 percent of the company's market value. Fannie Mae says it acted legally.

For more, see Fannie Mae Escrow Grab Exposes Shareholders to 24% Loss in Suit.