Class Action Targets G-Fees

A class action suit has been filed against Fannie Mae and Freddie Mac in Superior Court of California in Los Angeles on behalf of borrowers who claim they paid more for residential real estate loans because of inflated prices for guarantee fees.The law firm of Milberg Weiss Bershad & Shulman LLP is representing the plaintiffs in the case, according to Laurence Platt, a partner with the Washington law firm of Kirkpatrick & Lockhart LLP. The lawsuit alleges that Freddie Mac and Fannie Mae entered into a contract in 2001 to "fix, raise, maintain or stabilize" g-fees paid in connection with residential real estate loans. According to the suit, in 2004, despite declining losses due to defaults, guarantee rates were kept far above cost at artificially high prices, allowing Fannie Mae and Freddie Mac to bring in g-fees totaling $4 billion in 2004. Mr. Platt told MortgageWire he thinks the plaintiffs are "trying to criminalize the normal give-and-take of negotiated trend transactions between sellers and purchasers. The significant feature is that unidentified lenders, anyone who got these incorrect high g-fees, are named as co-conspirators." Mr. Platt said the ambiguous nature of the class action could lead to the naming of a number of lenders in the lawsuit, which is now only against Fannie and Freddie.