Rep. Darrell Issa probes Fannie Mae, BofA deal, Was This a Back-Door Bailout? - FORECLOSURE FRAUD

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Rep. Darrell Issa probes Fannie Mae, BofA deal, Was This a Back-Door Bailout?

Rep. Darrell Issa probes Fannie Mae, BofA deal, Was This a Back-Door Bailout?

Is Fannie Mae’s Purchase of Troubled B of A Portfolio a Back-Door Bailout?

Oversight Chairman Issa Asks FHFA to Address Questions Raised about Purchase of Risky Portfolio with Deteriorating Value

(WASHINGTON) – Fannie Mae, the government sponsored enterprise bailed out with billions in taxpayer dollars has agreed to buy a portfolio of high risk, deteriorating value loans from Bank of America (B of A). House Oversight and Government Reform Committee Chairman Darrell Issa (R-CA) has opened an investigation into this purchase and requested that Federal Housing Finance Agency (FHFA) Acting Director Edward DeMarco provide to the Committee documents and a full explanation of the agency’s decision-making process in this purchase.

In a letter sent to DeMarco today, Issa said Fannie Mae’s purchase of mortgage servicing rights from Bank of America is worrisome because as a government-backed enterprise Fannie Mae does not traditionally service mortgages. He also pointed out that the transaction likely shifted to Fannie Mae a significant amount of risk previously held by B of A.

Issa cited an August Wall Street Journal report that Fannie Mae had agreed to purchase from B of A “rights to process and collect payments on a pool of 400,000 loans with an unpaid principal balance of $73 billion.” Fannie Mae paid B of A $500 million for this portfolio. The story also pointed out that, “the bank decided to sell the portfolio at a loss because its value is expected to deteriorate further.” The loans purchased by Fannie Mae are reported to have a delinquency rate of more than 13% (twice the national average) with more than half of the loans on properties in troubled local markets.

To date, the Treasury Department has provided Fannie Mae (and its sibling government sponsored enterprise Freddie Mac) with over $150 billion since they entered conservatorship in September 2009. In addition, the Federal Reserve Board has committed to purchase $1.25 trillion of mortgage-backed securities owned by the enterprises. In August Fannie Mae announced that it would seek an additional $5.1 billion from the Treasury Department.

“Some commentators have labeled this transaction as a back-door bailout of B of A by permitting the bank to shift part of its risky portfolio to American taxpayers. Under these circumstances, I am unclear why the FHFA allowed Fannie to proceed with the transaction,” Issa wrote.

“Congress and the American people deserve a full explanation for what appears to be yet another bailout paid for by taxpayers benefitting businesses that made bad business decisions,” he said.

Issa’s letter to DeMarco included a dozen detailed questions about FHFA’s oversight and Fannie Mae’s process of evaluating the portfolio, assessing risk, and preventing further losses that could jeopardize the enterprise and require additional taxpayer support. A copy of the letter is here.

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[ipaper docId=65146575 access_key=key-1ra0943oywvkp1u42tni height=600 width=600 /]

 

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One Response to “Rep. Darrell Issa probes Fannie Mae, BofA deal, Was This a Back-Door Bailout?”

  1. PaulR says:

    How can I find out if my mortgage loan is one of those in this bundle? Although I no longer know the website to check it, I have checked a couple of times before to see if my BofA-serviced mortgage was owned by Fannie or Freddie, and it was NOT — it’s supposedly owned by one of the US Bank Trusts.

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