Fannie Mae has agreed to pay the government $7.5 million to settle a case in which the mortgage giant allegedly knowingly accepted proceeds of a mortgage scam.

The company did not admit wrongdoing in the consent order announced Wednesday, according to news sources.

A federal judge in Charlotte, N.C., had previously ordered Fannie Mae to forfeit $6.5 million in funds determined to have come from fraudulent activities by First Beneficial Mortgage Corp. in North Carolina. First Beneficial obtained the funds to repay Fannie Mae by selling them to Ginnie Mae, which guarantees mortgage-backed securities composed of federally insured or guaranteed loans.

In the 1990s, Fannie Mae bought millions of dollars worth of mortgages from First Beneficial. When Fannie Mae learned the mortgages were fraudulent, it demanded that First Beneficial buy them back, which it did by selling the same loans to Ginnie Mae.

After that news came to light in November, three U.S. lawmakers sent a letter to Fannie Mae asking the company to explain its dealings with First Beneficial. They want to know when Fannie Mae knew that First Beneficial might try to sell the loans to Ginnie Mae to raise the funds to repay Fannie. They also asked whether executives took any action to inform regulators about the questionable loans.

The $7.5 million the company agreed to pay represents the $6.5 million plus about $1 million in interest. The money will go to Ginnie Mae.

“Fannie Mae does not wish to retain the funds or benefit from First Beneficial’s illegal activities,” spokesman Charles Greener said in a written statement, according to news sources. He said the agreement brings “a swift, appropriate and cooperative end for the Untied States and Fannie Mae in this matter.”

Fannie Mae, a shareholder-owned corporation chartered by the federal government, has already been the subject of much scrutiny this year in unrelated allegations of improper accounting.

The Securities and Exchange Commission launched a formal investigation of Fannie Mae after the Office of Federal Housing Enterprise Oversight released a 211-page report revealing evidence of improper accounting at the company. The company also has been the target of shareholder lawsuits and a Congressional hearing.


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