On August 29, the U.S. District Court for the Northern District of Ohio granted summary judgment to Freddie Mac and former executives, ending an investor suit brought by an Ohio state pension fund over alleged misrepresentations of subprime mortgage exposure before the 2008 financial crisis.
The court found the state pension fund failed to show a “genuine issue of material fact” regarding whether Freddie Mac made false statements about its subprime exposure, noting that public disclosures “accurately reflected the Company’s exposure based on disclosed methodology.” The court determined that internal risk management tools cited by the state pension fund “served different purposes than the public disclosures” and did not establish falsity.
Addressing Alt-A loan disclosures, the court observed there was “no universal definition of subprime or ‘Alt-A’ loans” and found no evidence that Freddie Mac’s statements were false or misleading. The court also held that credit risk statements were either “non-actionable puffery,” accurate historical facts, or protected forward-looking statements.
The court found the state pension fund did not establish reliance, damages or loss causation, concluding it failed to demonstrate that the November 20, 2007, corrective disclosure revealed risks that were “previously concealed” rather than “already known to the market.” The court entered final judgment in favor of the defendants on all claims bringing nearly 18 years of litigation to a close.
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