Reuters is reporting that:
“Fannie Mae agreed to pay Bank of America Corp about 20 percent more than it was contractually obligated to last year in order to transfer the servicing of troubled loans to another firm, a report by a watchdog found.
In a report to be issued on Tuesday, the inspector general for the Federal Housing Finance Agency urges the regulator to ensure Fannie Mae applies more scrutiny to the pricing of such transactions and possibly revise its contracts with mortgage servicers.”
The entire backdrop to this transaction is problematic. An FHFA official “wondered whether Fannie Mae squeezed Bank of America hard enough on price considering the bank was benefiting by “getting this stuff off their books.”
Making this even more problematic, Fannie Mae came up with the valuation by relying on a single contractor to come up with prices for most of the transactions.” In other words, this was a no bid deal that was based on one person’s opinion, no market pricing mechanism, and ended up a sweetheart deal for BofA.
Here’s the thing: This was no accident — it was by design. Starting with Bush, and continuing with Obama, the GSE takeover was an easy way to continue funneling money to banks with minimal scrutiny. This has been a pet peeve of mine for some time now, as the laundry list of previous posts (below) shows.
Think about that the next time someone tells you how much money Treasury has made on the bailouts.
Previously:
Fannie And Freddie And the Backdoor Bank Bailout (May 12, 2010)
GSEs: $1 Trillion Dumping Ground for Bad Bank Loans (Jun 14, 2010)
Why You Really Should Be Angry About Fannie/Freddie (Dec 18, 2010)
BofA Freddie Mac Putbacks Resolved for 1¢ on $ (Jan 4, 2011)
Open-Ended Bailouts Are Continuing for Big Banks (Mar 25, 2012)
Government’s “Homeowner Relief” Programs Are Disguised Bank Bailouts (Aug 19, 2012)
Source:
Fannie Mae paid BofA premium to transfer soured loans: regulator
Rick Rothacker
Reuters, Sep 18 2012
http://in.reuters.com/article/2012/09/18/mortgages-watchdogreport-idINL1E8KHG7220120918
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