As noted earlier this week, the one cent on the dollar Bank of America/Freddie Mac settlement was a huge potential windfall for the bank, and a royal screwing for taxpayers.
Originally, Fannie Mae and Freddie Mac sought to recoup losses on structurally-flawed mortgages purchased by the GSEs that were created with faulty data, fraudulent disclosures as to borrowers’ FICO score, income and LTV for houses. To date, Bank of America received more than $21 billion in demands to buy back loans from the GSEs.
Want additional proof as to the non-economic basis of this settlement ? Bank of America made the claim the $2.8 billion accord with the GSEs was a “necessary step” in the housing recovery. This suggests to me that the sweetheart deal was rationalized by Treasury as part of a bigger housing rehabilitation concern. Hence, the huge giveaway.
As I have noted repeatedly over the years, the Fannie/Freddie bailout has been a back door bailout and a continual gift to the big banks. Apparently, readers of the Big Picture are also found in Congress:
“The deal “may have been both premature and a giveaway,” said Waters, a California Democrat, in a statement. The accord may “amount to a backdoor bailout that props up the bank at the expense of taxpayers.”
The agreements resolved claims from McLean, Virginia-based Freddie Mac on 787,000 loans with unpaid principal of $127 billion sold through 2008 by Countrywide Financial Corp. The deal with Washington-based Fannie Mae resolved claims on about $4 billion in loans, Bank of America said.”
GSEs: $1 Trillion Dumping Ground for Bad Bank Loans (June 14th, 2010)
Fannie And Freddie And the Backdoor Bank Bailout (May 12th, 2010)
Guess Who Benefits Most From Foreclosure Abatements? (August 16th, 2010)
BofA Freddie Mac Putbacks Resolved for 1¢ on $ (January 4th, 2011)
BofA Says Fannie Deal a ‘Necessary Step’ in Housing Recovery
Bloomberg, Jan. 5 2011