Fannie Mae’s Conservator Sued by Pension Funds Group Over Recovery Limit

 August 29, 2011 ( – A pension fund investors group sued Fannie Mae’s conservator over a rule that could limit their recovery for damages stemming from securities fraud, according to Bloomberg Business Week.


The Ohio Public Employees Retirement System and the State Teachers Retirement System of Ohio asked a federal judge in Washington to throw out the Federal Housing Finance Agency (FHFA) rule, which sets the priority for payment of unsecured claims against Fannie Mae and Freddie Mac, the home mortgage finance companies now under government control.

The pension funds argue that the rule, which took effect July 20, violates the Appointments Clause of the U.S. Constitution and the Housing and Economic Recovery Act because Edward DeMarco, FHFA’s acting director who imposed the rule, has been in his position for almost two years without Senate confirmation.

The FHFA is being charged with protecting the safety and soundness of the two companies while they are reliant on government aid.

Paying damages on securities lawsuits could leave fewer resources to pay higher priority claims, the FHFA said when it proposed the rule a year ago.

The case is Ohio Public Employees Retirement System v. Federal Housing Finance Agency, 11-cv-01543, U.S. District Court, District of Columbia (Washington).