Internal Warnings Sounded on Loans At Fannie, Freddie

Andrukonis was joined by others expressing concerns. Don Bisenius, then a credit officer, wrote in an e-mail to Michael May, a top executive, that "the lack of verified information on a borrower's income and assets could clearly influence the risk potential in a loan and the ultimate performance of the loans."

In a separate e-mail, May wrote that he recognized the risks of the business. But he predicted "a different pattern [than] we did with no-doc lending before," suggesting there won't be big losses. He listed reasons including that Freddie had more information about borrowers' credit-worthiness than before and other tools for accessing risk.

In October 2004, May ultimately recommended continuing no-income, no-asset loans, though with some changes. Through Freddie Mac, May declined to comment. Syron signed off on continuing with the loans. Bisenius, now part of new Freddie chief executive David Moffett's inner circle, formally opposed the decision.

There is some mystery surrounding Andrukonis's ultimate role. In one document sent to Syron, he joined a group of people neither supportive of nor opposing the decision to continue no-income, no-asset loans, but registered as "neutral."

However, a person familiar with the discussions said Andrukonis and other risk officers continued to oppose the product until the very end. Freddie executives asked him to leave the company, according to people familiar with the matter, which he did in 2005.

Staff writer Amit R. Paley contributed to this report.