Freddie CEO Ignored Warnings, Report Says

Updated from 12:33 p.m. EDT.

Unheeded warnings four years ago about the quality of loans it was financing are now coming back to haunt Freddie Mac(FRE Quote) CEO Richard Syron.

The New York Times on Monday reported that former risk officer David Andrukonis in 2004 sent a memo to Syron that cautioned against financing questionable loans and stating concerns about the underwriting standards. The key risk that Freddie Mac faced was a decline in the valuation of homes and the only way to lessen the pain should that happen, was to be conservative in its lending.

Syron, however, was also under pressure from Congress to continue to purchase more loans from low-income borrowers. Even President Bush in 2004 issued policy statements in support of low-income home ownership. So Syron ignored the warnings and continued to push for more mortgages in an effort to placate politicians. In February, Bush authorized Freddie to increase its loan limits to $729,750 as jumbo lender Thornburg Mortgage(TMA Quote) came under pressure. ...