Skip to comments.Bank of America Settles with Fannie Mae for $10 Billion+ – Fannie Mae As “Simple Jack”
Posted on 01/07/2013 12:03:52 PM PST by whitedog57
Bank of American had a bad day. First, they were a party to the latest government refinancing program (the $10 billion dollar foreclosure abuse settlement). Second, Bank of America has settled with mortgage giant Fannie Mae.
WASHINGTON Bank of America Corp. said Monday it had agreed to pay more than $10 billion to Fannie Mae to settle claims related to troubled mortgages sold largely by Countrywide Financial Corp. during the subprime housing boom.
First of all, it was a housing boom, not just a subprime housing boom.
Second, the government mortgage giants Fannie Mae knew that a large percentage of the loans they purchased were high loan-to-value ratio or low credit (FICO) score. During the 2000-2008 time period, up to 40% of the loans in several years that Fannie Mae and Freddie Mac purchased could be defined as subprime (greater than 80% LTV and < 660 FICO score). So, Fannie Mae knew these loans were risky.
This settlement is consistent with the failure to understand that 1)the Federal government encouraged lenders to originate risky loans and 2) encouraged Fannie Mae to purchase or insure them. But the Federal government and their step child Fannie Mae are seemingly off the hook for any blame or financial consequences.
Read this and weep.
Ah, you say, but Countrywide did the mortgage originations. Shouldnt they be liable for misrepresentations and the like?
Of course, but Fannie Mae and Freddie Mac are extremely sophisticated and knew the LTV and credit score of the loans they purchased. Knowing that many of them were high risk, wouldnt you think that Fannie Mae and Freddie Mac would have done spot checking on a sample of the loans they purchased?
The ruling in this case says it is acceptable for HUD to create reckless housing policy and have no consequences. And it is acceptable for the Fannie Mae to pretend it is too stupid to spot check loan files. But it is NOT acceptable for Countrywide to sell these loans, according to the court.
Fannie Mae, once thought to be the brilliant, top dog of real estate finance in the world, had to play Simple Jack from the movie Tropic Thunder to win the case. That is, they were too stupid to spot check underwriting files even though they would be exposed to massive risk and failure.
Or did they just shut their eyes? Or President Reagan once said, Trust, but verify.
Is that so hard, Fannie Mae?
Is that Ben Stiller or Mudd, the CEO of Fannie Mae that bought all the loans from Angelo Mozillo?
Unfortunately, none of this money will be seen by the consumers who were duped...it will just go in the black hole that is Washington and used for more pork and “black icebergs”....
Fannie Mae paid hundreds of Millions of Dollars in bonuses...for being stupid?!
Is there a difference? :)
Angelo Mozilo should be set on fire on live tv.
And yet Frank Dodd still walks around free.
The consumers who were duped by being sold bigger, better cheaper mortgages than they deserved—or bothered to pay back?
Every loan bought by Fannie had the origination data sent along with any verifications. It goes directly into their system. There is no need to “spot check” if the FICO score, LTV, or debt to income were within their lending policy requirements.
We don’t need to raise no stinkin’ taxes, just sue every (evil) corporation in the country and stick it in Geitners pockets!