BREAKINGVIEWS- Inept Fannie/BofA deal highlights US mortgage mess

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Inept Fannie/BofA deal highlights US mortgage mess

Inept Fannie/BofA deal highlights US mortgage mess

Reuters-

An inept $512 million mortgage deal between Fannie Mae (FNMA.OB) and Bank of America (BAC.N) casts another revealing spotlight into what ails mortgage finance in America. A new report shows that the government-controlled agency paid too much to pull some loan servicing business from Bank of America for doing a bad job. This double incompetence doesn’t just reflect poorly on the two firms. It’s a reminder that the backbone of the U.S. housing finance is in dire need of repair.

Critics lambasted the deal as a back-door bailout for the struggling mega-bank when it was struck in August last year. But the investigation by the Federal Housing Finance Agency’s inspector general instead reveals it was actually the result of a dysfunctional system.

Fannie may guarantee U.S. home mortgages, but it outsources the collection and paperwork to servicers like BofA, Wells Fargo (WFC.N), JPMorgan (JPM.N) and others. These have done a terrible job handling troubled loans, as the 2010 robo-signing scandal and the ensuing $25 billion settlement with the nation’s five largest servicers proved.

[REUTERS]

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