U.S. Circuit Court of Appeals Prohibits Judicial Review Against FHFA in Fannie Mae, Freddie Mac
U.S. Circuit Court of Appeals concluded to bar judicial review against the Federal Housing Finance Agency for its treatment to shareholders of two mortgage lenders Fannie Mae and Freddie Mac after 2008 crisis. The court ruled on Tuesday, Feb. 21 in Washington that lawsuit filed by the investors is inhibited in the Recovery Act.
Judges are divided in the opinion regarding the case Perry Capital LLC v. Mnuchin as Judge Janice Rogers Brown dissented, Washington Post reported. In the majority opinion written by Senior Judge Douglas H. Ginsburg and Judge Patricia Ann Millett, the court ruled that statutory claims by the shareholders are precluded in the Housing and Economic Recovery Act of 2008.
“We hold that the stockholders’ statutory claims are barred by the Recovery Act’s strict limitation on judicial review,” read the court opinion on the case. This has been a major loss for hedge fund Perry Capital and other big investors to prevent government in taking control of the profit from the two mortgage lenders, Fannie Mae and Freddie Mac.
The two government sponsored enterprises have been under FHFA supervision after the 2007 subprime mortgage crisis, which predated the global financial crisis in 2008.Following the crisis, government took over the two main players of the housing mortgage market. They are Federal National Mortgage Association and Federal Home Loan Mortgage Corporation, which was kown as Fannie Mae and Freddie Mac respectively were nearly collapsed. However, the Congress decided to take over them under the FHFA.
U.S. Treasury Secretary Steven Mnuchin has decided to fix the housing mortgage market in the United States, Bloomberg reported. The $10 trilion market has required a major revamp and this is the major challenge for the former hedge fund manager. President Trump selected Mnuchin as the Treasury Secretary due to his experience in the mortgage market during his tenure in hedge fund market.
Watch the interview with Mnuchin in CNBC “Squawk Box” regarding his plan to revive the mortgage market below: