Fannie and Freddie go on the offensive for being sold “sacks of —-” by the big banks
Here are the highlights of the article linked below:"The Federal Housing Finance Agency suits, which are expected to be filed in the coming days in federal court, are aimed at Bank of America, JPMorgan Chase, Goldman Sachs and Deutsche Bank, among others, according to three individuals briefed on the matter."
"The suits will argue the banks, which assembled the mortgages and marketed them as securities to investors, failed to perform the due diligence required under securities law and missed evidence that borrowers’ incomes were inflated or falsified. When many borrowers were unable to pay their mortgages, the securities backed by the mortgages quickly lost value."
"Fannie and Freddie lost more than $30 billion, in part as a result of the deals, losses that were borne mostly by taxpayers."
"In July, the agency filed suit against UBS, another major mortgage securitizer, seeking to recover at least $900 million, and the individuals with knowledge of the case said the new litigation would be similar in scope."
"…last month, the insurance giant American International Group filed a $10 billion suit against Bank of America, accusing the bank and its Countrywide Financial and Merrill Lynch units of misrepresenting the quality of mortgages that backed the securities A.I.G. bought."
"“While I believe that F.H.F.A. is acting responsibly in its role as conservator, I am afraid that we risk pushing these guys off of a cliff …"
"The suits are being filed now because regulators are concerned that it will be much harder to make claims after a three-year statute of limitations expires on Wednesday, the third anniversary of the federal takeover of Fannie Mae and Freddie Mac."
"As of June 30, Freddie Mac holds more than $80 billion in mortgage securities backed by more shaky home loans like subprime mortgages, Option ARM and Alt-A loans. Freddie estimates its total gross losses stand at roughly $19 billion. Fannie Mae holds $38 billion of securities backed by Alt-A and subprime loans, with losses standing at nearly $14 billion."
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Evan M. Rosen
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