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FURTHER CORRUPTION OF TITLE CHAIN
EDITOR’S ANALYSIS: The ball is rolling now and picking up steam. The game is to settle these claims for big numbers, diverting attention from the REAL problem. These “buybacks” give the impression that Fannie and Freddie actually had ownership of the loans. All indications are to the contrary. The loans were not transferred to begin with, so the “buyback” is a payment for damages related to fraudulent sale of non-existent mortgage loans or at least obligations, notes and mortgages (Deed of Trust) that the Seller didn’t have in the first place.
They may call it a “buyback” but the truth is that it is friendly settlement for damages in return for Fannie and Freddie pretending that ownership of the loans is not an issue. But since we know that no transfer papers (indorsements, assignments, delivery etc.) papers were prepared much less executed at the time the loans were supposedly transferred to Investors (Fannie and Freddie included) the “sale” to Fannie and Feddie was a fiction — BOA had nothing to sell and neither did Countrywide.
So the “buyback” gives BOA nothing since Fannie and Freddie never legally took ownership. As usual, money exchanged hands but no papers that were anything but fictitious representations of what could have happened but didn’t. The settlement involves coloring the trillions of dollars in loans as having some authenticity when under a low power microscope the slide is empty.
Thus these settlements are really not much more than rounding errors for the actual liability which is put to bed along with supporting the fiction that the securitization of the loans ever really took place. They didn’t. The buybacks are a game designed to influence the judiciary and the media that the loans are in these giant pools when in fact the pools are empty and in many cases were not even really formed in the first place.
ONE ON ONE WITH NEIL GARFIELD
Bank of America Settles Fannie Mae and Freddie Mac Claims
By DEALBOOK
Bank of America Buys Back $2.5 Billion in Mortgage Debt
By BEN PROTESS and ERIC DASH
Win Mcnamee/Getty Images7:31 p.m. | Updated
Bank of America announced Monday that it had paid more than $2.5 billion to buy back troubled mortgages and resolve related claims from Fannie Mae and Freddie Mac — deals that may prompt a wave of such settlements by big banks.
The agreements center on home loans that Countrywide Financial sold to Fannie and Freddie at the height of the mortgage bubble. The government-controlled housing giants, which have suffered billions of dollars in losses in recent years, have said that the lender misrepresented the quality of the loans. Bank of America bought Countrywide in 2008.
Fannie and Freddie also are looking to collect from other large lenders, including Wells Fargo, Citigroup and Washington Mutual, now owned by JPMorgan Chase.
Before the Bank of America payments, Fannie and Freddie received about $9 billion from repurchase claims, according to their financial statements. The two firms still have more than $10 billion of requests outstanding.
Banks have a major incentive to cut deals with Fannie and Freddie. The two firms currently own or guarantee roughly two-thirds of all new mortgages in the United States.
“There is no reason to incur the expense and bad publicity that would come with fighting Fannie and Freddie when the parameters of these deals are pretty clear,” said Jaret Seiberg, a financial policy analyst at MF Global.
Other banks seem to be moving in the same direction as Bank of America.
On Dec. 27, Ally Financial agreed to pay Fannie $462 million to settle repurchase claims over mortgages sold by GMAC Mortgage, an Ally subsidiary. JPMorgan Chase said in November that it set aside $1 billion to repurchase some loans originated by Washington Mutual.
“The whole repayment issue has been a cloud hanging over the banking industry,” said Guy D. Cecala, publisher of the industry newsletter Inside Mortgage Finance. “I would expect that everyone will be looking to settle now.”
Shares of Bank of America rose more than 6 percent on Monday.
Fannie and Freddie are not the only ones asking for their money back.
The banking industry, according to various estimates, could spend $20 billion to $150 billion to buy back $2 trillion of bad loans from Fannie and Freddie, bond insurance companies and private investors.
Bond insurers, including MBIA, guaranteed mortgages while big investors bought securities backed by home loans. Many of the original deals with insurers and investors required lenders to buy back mortgages that failed to meet certain underwriting criteria.
Bank of America, the nation’s biggest bank, may be most exposed. The bank is facing so-called put-back claims from insurance companies and more than a dozen private investors that bought roughly 160 troubled mortgage securities from Countrywide. Among those scorned: the Pacific Investment Management Company, the big bond firm; BlackRock, the large money manager; and the Federal Reserve Bank of New York.
Allstate separately sued Bank of America on Dec. 27 over $700 million in mortgage-backed securities that Countrywide sold to the insurance company. Allstate said that the bank had poor lending standards and should have known that the loans would go bad.
The bank originally vowed to challenge such claims. In December, however, the bank disclosed that it was in discussions to settle with some private investors.
Such deals, though, may be harder to strike. While Fannie and Freddie imposed strict terms on mortgage purchases, other investors often made far murkier arrangements. Additional requirements on private deals — like needing the consent of as much as 25 percent of investors before taking legal action — may also make it more difficult to bring cases. Settlement discussions may drag on for years.
As part of Monday’s announcement, Bank of America said it had made a $1.34 billion net cash payment to Fannie Mae and another to Freddie Mac for $1.28 billion on Dec. 31.
Bank of America said the deals with Fannie and Freddie would resolve nearly all the claims against Countrywide but not their claims against Bank of America.
“These actions resolve substantial legacy issues in the best interest of our shareholders,” the chief executive, Brian T. Moynihan, said in a statement.
“Our goals remain the same: put these issues behind us, focus on serving customers and clients and continue to help distressed homeowners facing difficult times.”
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