Monday, February 10, 2014

Filed 02/05/14 Continental vs. FHFA

Filed 02/05/14

Continental vs. FHFA

Continental Western Insurance Company (“Continental Western” or “Plaintiff”), by and

through the undersigned attorneys, files this Complaint against Defendants Federal Housing

Finance Agency (“FHFA”), in its capacity as conservator of the Federal National Mortgage

Association (“Fannie”) and the Federal Home Loan Mortgage Corporation (“Freddie”)

(collectively, the “Companies”); Melvin L. Watt, in his official capacity as the Director of

FHFA; and the Department of the Treasury (“Treasury”). Plaintiff seeks declaratory and

injunctive relief (1) to prevent Defendants from giving effect to the so-called “Net Worth

Sweep” purportedly agreed to between FHFA, as conservator, and Treasury in August 2012,

which effectively nationalized the Companies in violation of the governing statute, the

Companies’ contractual obligations, and FHFA’s fiduciary duties to the Companies’ private

shareholders, (2) to prevent Defendants from giving effect to purchases of the Companies’

securities made by Treasury after December 31, 2009, when Treasury’s “emergency” powers to

invest taxpayer funds in the Companies expired, and (3) to cause FHFA, as conservator of

Fannie and Freddie, to cease acting at the direction and for the benefit of Treasury or any other

agency of the United States, rather than Fannie and Freddie, in open violation of the Housing and

Economic Recovery Act of 2008 (“HERA”). Plaintiff also seeks an award of damages against

FHFA for breach of contract, breach of the implied covenant of good faith and fair dealing, and

the improper payment of de facto common stock dividends to Treasury at a time when

contractually senior preferred stock dividends to Plaintiff continue to be unpaid.

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