Fannie Mae and Freddie Mac are central to the US housing market
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Four former senior executives at Fannie Mae have been sued by investors in the troubled mortgage firm.
The investors claim Stephen Ashley, Daniel Mudd, Robert Levin and Steven Swad lied about the firm's finances, artificially inflating its share price.
The move came after the US government took over the firm, ousting Mr Ashley, Mr Mudd and Mr Levin from their jobs.
Fellow lender Freddie Mac was also bailed out in a move that could cost the US taxpayer $200bn (£113bn).
The class action says the four had been "motivated to misrepresent Fannie Mae's financial condition by their generous compensation packages".
Worthless
Former chairman Mr Ashley, ex-president Mr Mudd and the ousted chief business officer Robert Levin lost their jobs on Sunday.
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FREDDIE MAC & FANNIE MAE
The two firms:
Buy mortgages from approved lenders and then sell them on to investors - rather than lending directly to borrowers
Guarantee or own about half of the $12 trillion US mortgage market
Are relied on by almost all US mortgage lenders
Supply funds to meet consumer demand for mortgages
Link mortgage lenders with investors - keeping the supply of money widely available and at a lower cost
Have no direct UK equivalent
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Mr Swad had been replaced as chief financial officer of the firm in late August, before the treasury intervened.
The New York Times reported that both Freddie Mac and Fannie Mae had pushed losses it had already incurred into the fourth quarter of 2008 - meaning that they would not have to reveal them until next year.
But it added that neither firm had necessarily breached accounting rules.
Both firms had also factored in tax benefits on profits that they were yet to see - credits which are worthless until profits are actually made. Neither lender has seen a profit for the past twelve months.
Options
Separately, Treasury Secretary Henry Paulson has said that the next few months should be used as "time out" to decide what to do with the two firms.
Long-term possibilities for the government-sponsored companies include taking them private, having full nationalisation, or allowing them to operate as private businesses with government backing.
The decision will be made by the new president and the new congress - meaning no choices can be made until the end of the year.
However Mr Paulson said it would be a "grave error" if the intervening time was not used to address how the firms would be structured.
Between them Freddie Mac and Fannie Mae finance or guarantee nearly half of the outstanding mortgages in the US, and have lost billions of dollars during the US housing slowdown.
Much of their bond debt was ultimately held by Asian banks, who recently begun withdrawing their investment.
The most recent figures show that about 9% of US mortgage holders were behind on their payments or faced repossession.
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