Bank of America Corp. has agreed to sell part of its home-loan portfolio to government-controlled housing giant Fannie Mae, as the bank looks to shed assets and pare its exposure to an array of mortgage woes.
The deal, finalized last Friday, will deliver the rights to process and collect payments on a pool of 400,000 loans with an unpaid principal balance of $73 billion, people familiar with the deal said. The purchase price is more than $500 million, one of these people said.
YOU’D think the mortgage bust would qualify as a teachable moment.
But some people refuse to learn from mistakes — a list that apparently includes certain mortgage bankers. Their industry is fighting a new rule that might prevent a repeat of the lending binge that helped drive our economy off a cliff.
In case you just arrived from another planet: America’s mortgage mania was fueled by home loans with poisonous features that made them virtually impossible to repay. It was fun while it lasted, at least for the financial types who profited by making dubious loans and selling them to investors.
I can no longer say that not a single senior executive of one of the major nonprime lenders whose frauds hyper-inflated the housing bubble and caused the Great Recession has been convicted of his frauds. A single senior executive of one of the hundreds of fraudulent nonprime lenders was convicted yesterday, April 19, 2011. A jury found Lee Farkas, Chairman of the Board of Taylor, Bean & Whitaker (TBW), guilty of fraud. TBW was a large mortgage banking firm that made many nonprime loans, but the prosecution does not address the fraudulent nonprime lending.
[…]
Third, note that while a Colonial Bank officer pleaded guilty for assisting these frauds against Colonial Bank, no one has pleaded guilty at Freddie Mac. The critical question is whether TBW actually delivered the key loan documents to Freddie Mac. Did Freddie Mac obtain an enforceable security interest or was it defrauded by TBW? Was Colonial Bank the only victim of the double sale/pledge?
The New York Fed will instead sell the assets individually and in blocks, the regulator said yesterday in astatementposted on its website.BlackRock Inc. (BLK), the New York Fed’s investment manager, will issue the first bid list next week, according to the statement.
“We had anticipated we would have the opportunity to buy these assets at a fair price by January 2011 and earn a return on them for the benefit of the U.S. taxpayer,” Mark Herr, a spokesman for New York-based AIG, said in an e-mailed statement. “Now, we must make up for lost time and lost earnings.”
Barclays Plc (BARC) is among investors considering making a counter offer, the Financial Times reported, citing unidentified people familiar with the matter. Seth Martin, a Barclays spokesman in New York, declined to comment.
Pursuant to that certain Asset Purchase Agreement, dated as of December 12, 2008 (as amended to date, the “Asset Purchase Agreement”), by and among the sellers party thereto (such entities, the “Original Sellers”), Maiden Lane II LLC (“ML II”), as buyer, the Federal Reserve Bank of New York (the “FRBNY”), as controlling party, American International Group, Inc. (“AIG Inc.”) and AIG Securities Lending Corp., as AIG agent, ML II purchased from the Original Sellers tranches of residential mortgage-backed securities. Pursuant to that certain Credit Agreement, dated as of December 12, 2008 (as amended to date, the “Credit Agreement”) among ML II, as Borrower, the FRBNY, as Controlling Party and as Senior Lender, and The Bank of New York Mellon, as Collateral Agent, the FRBNY made a loan to ML II to finance the purchase of the assets (the “Senior Loan”). Capitalized terms used but not defined herein, shall have the meanings ascribed thereto in the Credit Agreement and if not defined therein, the meaning ascribed thereto in the Asset Purchase Agreement.
Set forth below is a summary of proposed terms under which AIG Inc. would propose to enter into a Purchase Agreement (the “AIG Inc. PA”) with ML II and FRBNY, as Senior Lender and Controlling Party, pursuant to which one or more Buyers (as defined below) would purchase from ML II all of the assets (other than cash) owned by ML II as of the Cut-Off Date set forth below (each such asset, individually, an “Asset”, and collectively, the “Assets”).
ALLSTATE BANK, ALLSTATE
INSURANCE COMPANY, ALLSTATE
LIFE INSURANCE COMPANY,
ALLSTATE NEW JERSEY INSURANCE
COMPANY, ALLSTATE LIFE
INSURANCE COMPANY OF NEW YORK,
AGENTS PENSION PLAN, and ALLSTATE
RETIREMENT PLAN,
Plaintiffs,
-against-
JPMORGAN CHASE BANK, N.A.; J.P.
MORGAN ACQUISITION CORPORATION;
J.P. MORGAN SECURITIES INC.; J.P.
MORGAN ACCEPTANCE CORPORATION
I; WM ASSET HOLDINGS
CORPORATION; WAMU ASSET
ACCEPTANCE CORPORATION; WAMU
CAPITAL CORPORATION;
WASHINGTON MUTUAL MORTGAGE
SECURITIES CORPORATION; LONG
BEACH SECURITIES CORPORATION;
DAVID BECK; DIANE NOVAK; THOMAS
LEHMANN; EMC MORTGAGE
CORPORATION; STRUCTURED ASSET
MORTGAGE INVESTMENTS II INC.;
BEAR STEARNS ASSET BACKED
SECURITIES I LLC; and SACO I INC.
Defendants.
excerpt:
NATURE OF ACTION
1. This action arises out of Defendants’ fraudulent sale of residential mortgage-backed
securities in the form of pass-through certificates (the “Certificates”) to Allstate.
Whereas Allstate was made to believe it was buying highly-rated, safe securities backed by pools
of loans with specifically-represented risk profiles, in fact, Defendants knew the pool was a toxic
mix of loans given to borrowers that could not afford the properties, and thus were highly likely
to default.
2. Defendants made numerous material misrepresentations and omissions regarding
the riskiness and credit quality of the Certificates in registration statements, prospectuses,
prospectus supplements, and other written materials (the “Offering Materials”).
As the foreclosure crisis has escalated over the past several months, one overarching debate has been about who bears the most blame: homeowners or banks?
After everything I’ve learned and written about the foreclosure mess, my verdict is: The banks are responsible for 90% of the problem, troubled homeowners 10%.
Yes, every foreclosure involves a homeowner not paying his mortgage. But every foreclosure also involves a bank that made the loan. And usually another bank, or several more, that profited from securitizing the loan. And still another bank, or several, that profited from servicing the loan. Together, those banks have done three things that created the massive glut of foreclosures choking America’s legal systems and laying waste to its real estate markets:
They knowingly made millions of loans doomed for foreclosure as soon as the check was written.
They deliberately and/or incompetently failed to modify many salvageable mortgages.
They were so careless with their paperwork and processes that they’ve undermined the rule of law, clouded the title to untold numbers of properties and complicated the processing of the massive backlog of foreclosures that hurts the economically crucial real estate market.
By Aaron Smith, staff writerJanuary 3, 2011: 9:02 AM ET
NEW YORK (CNNMoney) — Bank of America has reached a $3 billion agreement with Freddie Mac and Fannie Mae to resolve a faulty mortgage loan dispute involving Countrywide Financial Corp.
Bank of America (BAC, Fortune 500) said that it paid nearly $1.3 billion to Freddie Mac and more than $1.3 billion to Fannie Mae on Dec. 31.
The purpose of this agreement is to settle an issue of bad mortgages sold by Countrywide to Fannie Mae and Freddie Mac related to the housing crisis of 2008.
By David Ellis, staff writer July 29, 2010: 3:57 PM ET
NEW YORK (CNNMoney.com) — Citigroup said Thursday it would pay $73 million to settle charges by the Securities and Exchange Commission that the bank, as well as two of its executives, misled investors about the company’s exposure to the subprime mortgage market.
Wall Street’s top regulator said Citigroup repeatedly made misleading statements in investor presentations and in public filings about the actual size of assets it controlled that were backed by subprime mortgages.
Between July and mid-October 2007, the company maintained its holdings of what have now been dubbed “toxic assets”, stood at $13 billion, when in fact the number was closer to $50 billion, according to the SEC.
“The rules of financial disclosure are simple — if you choose to speak, speak in full and not in half-truths,” Robert Khuzami, director of the SEC’s Division of Enforcement, said in a statement.
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