(collectively, "Defendants"), made or substantially assisted others in making materially false andmisleading statements regarding Fannie Mae's exposure to subprime and Alt-A loans.
For example, in a February 2007 public filing, Fannie Mae described subprimeloans as loans "made to borrowers with weaker credit histories" and reported that 0.2%, orapproximately $4.8 billion,
its Single Family credit book
December 31,2006, consisted
subprime mortgage loans or structured Fannie Mae Mortgage BackedSecurities ("MBS") backed by subprime mortgage loans.
Fannie Mae did not disclose to investors that
calculating the Company'sreported exposure to subprime loans, Fannie Mae did not include loan products specificallytargeted by the Company towards borrowers with weaker credit histories, including ExpandedApproval ("EA") loans. As
December 31, 2006, the amount
EA loans owned or securitized
the Company's single-family credit business was approximately $43.3 billion, yet none
these loans were included in the Company's disclosed subprime exposure.
Fannie Mae's exclusion
loans such as EA from its subprime disclosures wasparticularly misleading because EA loans were exactly the type
loans that investors wouldreasonably believe Fannie Mae included when calculating its exposure to subprime loans.
fact,the Company identified EA as its "most significant initiative to serve credit· impaired borrowers"
regulatory requests for information on its subprime loans. In addition, all
theDefendants knew that EA loans had higher average serious delinquency rates, higher creditlosses, and lower average credit scores than the loans Fannie Mae included when calculating itsdisclosed subprime loan exposure.
In a November 2007 public filing, Fannie Mae described subprime loans as a loanto a borrower with a "weaker credit profile than that
a prime borrower," classified