Posted on 01/18/2011 10:07:21 AM PST by FromLori
Disputes related to failed mortgages are ballooning amid the fallout of loan securitizations and sales made by some of the biggest banks. But, for the time being, it doesn't look like the primary bank regulators are doing much about it.
One example: The Federal Reserve Bank of New York is part of an investor group now asking Bank of America (BAC) to repurchase the mortgages it bought. The New York Fed sits in an interesting spot as both a concerned mortgage investor and as a regulator of the originators and securitizers that sell them.
Despite suffering as an investor itself, the Federal Reserve has not offered any indication that it plans to increase regulatory supervision of the banks' risk management practices when it comes to loan sales and securitization.
The Federal Reserve has produced a report on the issues involved with securitizations and is working with other regulators on implementing the new financial reform bill's "5% risk retention requirement," according to spokesperson Barbara Hagenbaugh. (Under Section 941 of the U.S. Financial Reform bill, originators and securitizers will be required to retain at least some exposure to securitized loans, with some exclusions.)
The Office of the Comptroller of the Currency, the other large bank regulator, believes that the underwriting standards for banks should be improved. Just the same, its principles have not changed in over a decade.
Back in 1999, the OCC stated that in "recent examinations, our examiners have noted an unacceptable number of national banks with risk management systems or internal control infrastructures insufficient to support the institution's securitization activities" and that "where examiners identify weak risk management practices or lax internal controls, bank management will be directed to take immediate corrective action."
(Excerpt) Read more at finance.fortune.cnn.com ...
“The Federal Reserve Bank of New York is part of an investor group now asking Bank of America (BAC) to repurchase the mortgages it bought.”
Why should BAC be forced to buy back these loans? As we have a number of ‘experts’ right here of FR that swear there is nothing wrong with these loans other than that the ‘DEAD BEATS’ need to be horse whipped and thrown into Debtor’s Prison.
(and we know who they are)
Excellent point :)
It isn’t only the NY Fed who wants them to buy back those mortgages either it’s Allstate, Pimco, Blackrock, MBIA, Fannie/Freddie, Pension Funds to name just a few others.
MBIA wins key ruling in Bank of America case
http://news.yahoo.com/s/nm/20101223/bs_nm/us_bankofamerica_mbia_lawsuit
Pimco, NY Fed Said to Seek BofA Repurchase of Mortgagesb(link only)
PIMCO, BlackRock, and NY Fed Ask BofA to Repurchase Mortgage Bonds
Allstate Sues BofA Over Bad MBS: Report
http://www.thestreet.com/story/10956524/allstate-sues-bofa-over-bad-mbs-report.html
Obama’s favorite banker Jamie Dimon has even said they will be talking about these every quarter for years though us taxpayers have been taking the real hit.
Is Fannie bailing out the banks?
“But how sharp is Freddie if all it can do is squeeze a $1.28 billion payment out of a giant customer in exchange for relinquishing fraud claims on $117 billion worth of outstanding loans? The very best its million-dollar executives can do is claw back a penny on each bubbly subprime dollar?”
http://finance.fortune.cnn.com/2011/01/03/is-fannie-bailing-out-the-banks/
They have even put aside over a Billion dollars so they must know these products were defective and they can only shove so many Billions on the taxpayers through the GSE’s.
If the loans were packaged into underwritten securities, and the loans in a given security were fraudulent in whole or in part, then BAC can indeed be forced to buy them back.
No fraud here. Resident FR experts have declared that there is no fraud even when banks use forged documents and prejury.
Ah right, I see where you’re going with this. No problem, totally agree with you.
JPM’s Mortgage Unit Sued To Disclose Loan Quality Data, Following Allegations It Misrepresented Over 70% Of Loan Portfolio
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