Shareholders Opposed FHFA Request for En Banc Review
Investors are challenging a bid to overturn a $900 million judgment regarding the Fannie Mae and Freddie Mac profit sweeps.
Updated on Oct. 7, 2026 in Corporate Finance
Live Poll
Should government agencies be required to honor original contract terms with investors during conservatorship?
Shareholders have filed a response urging an appellate court to reject a Federal Housing Finance Agency (FHFA) petition for en banc review in a long-running GSE lawsuit. The filing aims to preserve a $900 million judgment concerning the government's implied covenant with investors.
Why it matters
The dispute centers on allegations that the government breached obligations to investors through GSE profit sweeps, representing a significant test of regulatory powers under the Housing and Economic Recovery Act. For operators, the case highlights the long-term legal and financial uncertainties inherent in entities subject to federal conservatorship.
The current judgment value stands at approximately $900 million, an increase from the $612 million awarded in 2023. The FHFA faces a 90-day deadline to petition the Supreme Court should the current appellate request be denied.
The players
Federal Housing Finance Agency
The federal regulator that acts as the conservator for Fannie Mae and Freddie Mac and manages their operations.
Fannie Mae
A major government-sponsored enterprise incorporated in Delaware that provides liquidity to the U.S. mortgage market.
Freddie Mac
A government-sponsored enterprise incorporated in Virginia that secondary-markets residential mortgages nationwide.
Treasury
The executive department of the U.S. government responsible for managing public finances and, in this case, acting as a defendant in the litigation.
The details
The lawsuit alleges that the FHFA and the Treasury violated an implied covenant with investors when executing profit sweeps of Fannie Mae and Freddie Mac. A panel of appellate judges previously upheld a lower court decision in favor of the plaintiffs, but the FHFA is now seeking a review by the full court to challenge that outcome. If the judgment is upheld, actual payout procedures for the investor class—excluding common stock owners—could begin in 2027 or 2028.
Timeline
2023: The original judgment in the case was valued at $612 million.
October 7, 2026: Shareholders filed a formal response to the FHFA petition for en banc review.
2027 or 2028: Potential timeline for payout procedures to begin for eligible investors.
Market Landscape
The litigation over the GSE profit sweeps tests the scope of federal authority granted under the Housing and Economic Recovery Act. This filing marks the latest attempt by the FHFA to defend its actions against investor claims by leveraging specific provisions within that act.
Business owners should monitor the outcome of the en banc request, as it will clarify the standard for government liability regarding GSE profit sweeps. Consult with legal counsel regarding the implications of this ruling for similar investments or contracts involving government-controlled entities.
The takeaway
This case highlights the enduring risk of regulatory intervention for private investors in government-sponsored entities. Stakeholders should track the appellate court's upcoming decision on the en banc review, as it will determine the finality of the $900 million liability.
Further reading
For more on how regulatory decisions impact equity stakeholders, see Corporate Finance.
Source note: This article includes information reported by National Mortgage News.
Live Poll
Should government agencies be required to honor original contract terms with investors during conservatorship?
