Three former senior executives of Fannie Mae lost a bid on Friday to dismiss civil-fraud charges filed against them last year by the Securities and Exchange Commission over allegedly misleading investors about the quality of loans the mortgage giant guaranteed in the run-up to the housing bust, the Wall Street Journal reported today. The executives include Daniel Mudd, the former chief executive of Fannie Mae who in January resigned as chief executive of Fortress Investment Group LLC. They argued that the SEC's case should be dismissed because they provided detailed disclosures about the loan characteristics to investors. The SEC alleged that Fannie executives provided definitions and disclosures that misled investors about their exposure to those loans. U.S. District Judge Paul Crotty said in his ruling on Friday that the SEC had "plausibly argued" that the Fannie executives "consciously assisted the venture to misstate [Fannie's] subprime and Alt-A exposure in an active way."
