FHFA bars convicted short sale fraudster from the mortgage industry
The court found FHFA acted reasonably. The plaintiff’s bank fraud convictions plainly qualified as “covered misconduct” under program regulations, which cover any conviction involving fraud “in connection with a mortgage, mortgage business, mortgage securities or other lending product.” The rules give the agency discretion to impose suspensions “for a specified period of time or permanently,” and he pointed to no legal authority requiring a lesser sanction.
The plaintiff himself conceded FHFA “plainly” “possessed authority to suspend” him. His argument was narrower – that an indefinite ban was disproportionate. The court was unconvinced. On irreparable harm, it noted any reputational damage “is primarily attributable to his own prior criminal conduct.”
For mortgage professionals and compliance teams, the decision is a practical signal: FHFA’s Suspended Counterparty Program carries real teeth, and courts appear willing to defer to the agency on severity. An indefinite ban from Fannie, Freddie, and the Home Loan Banks is, for practical purposes, an industry exit order.
