The key issue in the case was whether Fannie Mae was in a fiduciary relationship with the plaintiff mortgagors. The plaintiffs were mortgagors whose mortgages for low-income multi-family housing were held or serviced by Fannie Mae and insured by HUD. HUD required mortgagors participating in its insurance program to sign a Regulatory Agreement. The Agreement mandated that mortgagors establish two funds with the mortgagee: 1) a Reserve Fund and 2) a Residual Fund. The Reserve Fund provision of the Agreement specifically contemplated that those funds may take the form of cash deposit or guaranteed investment. Fannie Mae gave mortgagors certain investment options for both their Reserve Fund and Residual Fund moneys. Some mortgagors chose to retain the liquidity and not invest any such funds. The "uninvested funds" were the subject of this lawsuit. Between 1969 and 1995, Fannie Mae invested "uninvested funds" in the overnight federal funds marketplace, retaining the interest proceeds for itself.
Ralph T. Wutscher
Kahrl Wutscher LLP
The Loop Center Building
105 W. Madison Street, Suite 2100
Chicago, Illinois 60602
Direct: (312) 551-9320
Fax: (866) 581-9302
Mobile: (312) 493-0874
NOTICE: We do not send unsolicited emails. If you received this email in error, or if you wish to be removed from our update distribution list, please simply reply to this email and state your intention. Thank you.
Our updates are available on the internet, in searchable format, at: http://updates.kw-llp.com