During their multiyear tenures at Fannie Mae and Freddie Mac, the pay of fired chief executives Daniel Mudd and Richard Syron amounted to only about a third of what was reported in the news media at the time because of plunges in the mortgage giants’ stock prices, the companies’ regulator said Thursday, September 25.
Mudd, formerly of Fannie Mae, earned $11.6 million in 2007, and Syron, formerly of Freddie Mac, made $18.3 million, according to the companies’ annual pay reports earlier this year.
But because “a major portion of their bonuses” were in stock, and today’s share price is much lower than it was when the stock was awarded, the value of their compensation has declined, James Lockhart, director of the Federal Housing Finance Agency, told the House Financial Affairs Committee.
Lockhart didn’t report specific figures and he declined to be interviewed, but a third of the executives’ 2007 pay would amount to about $3.9 million for Mudd and about $6.1 million for Syron.
Lockhart’s disclosure was contained in 1½ lines of his 15-page testimony about changes made at Fannie and Freddie since they were placed into conservatorship by their regulator on Sept. 7.
Among other things, the 30-year fixed-rate mortgages at Freddie have fallen below 6 percent for the first time since January, he testified. That’s because yields on Freddie’s guaranteed mortgage securities have fallen relative to Treasury debt yields by a third of a percentage point since Sept. 5.
The regulator also expects to have a new rule by Wednesday, October 1, to implement the August legislation giving temporary authority to Federal Home Loan Banks to refinance mortgages for families at or below 80 percent of area median income, Lockhart said.
As for Mudd and Syron, the executives also were expecting to receive severance packages worth more than $20 million when they were ousted this month. Instead, Lockhart barred them from receiving the “golden parachute” portions of these packages. He did not disclose the amounts they wouldn’t be paid.
Both executives were brought in to reform the mortgage giants, but instead presided over expansion of their reliance on risky mortgages, many of which have defaulted in the past two years.
Mudd, 49, became Fannie Mae’s CEO in December 2004, when the stock was trading at about $70 a share.
Syron, 64, took over at Freddie Mac in December 2003, when its shares were trading at about $55.
Both stocks were trading at around $1.65 on Thursday, September 25, on the New York Stock Exchange.