Records involving Fannie Mae, the largest source of United States home-loan money, have been subpoenaed by a federal grand jury as part of a criminal investigation into claims made in a US$7-billion civil lawsuit against the company.

"I think much of the materials in our case are relevant to the criminal case," Mark Lanier, the lawyer representing those who sued the company and whose records were sought, said yesterday in a Bloomberg News interview. "This subpoena is the sweet spot in our lawsuit."

The subpoenas, issued on Monday and filed on Wednesday in the US District Court in Texarkana, Texas, demand records from the Lanier Law Firm's offices in Houston and New York. Fannie Mae said in a regulatory filing on November 10 that it was "cooperating fully in a Department of Justice investigation."

Owners of government-insured low-income housing sued in 2004, claiming Fannie Mae illegally kept as much as US$7 billion earned on escrow accounts. Since almost all records in the case are sealed, the law firm could not turn them over to investigators without a subpoena, Lanier said. The owners allege that the regulations of the US Housing and Urban Development, which underwrote the mortgages, required Fannie Mae to create escrow accounts for each loan for improvements to the government-subsidized apartment complexes and return the interest to the mortgagees.

Damages in the proposed class-action lawsuit might reach US$7 billion, Lanier said in February.

(Shanghai Daily December 12, 2008)