Bank of America (BofA) recently announced it has paid over $2.5 billion to buy back a portion of the misrepresented mortgages previously sold to Fannie Mae and Freddie Mac by Countrywide Financial, which was acquired by BofA in 2008.
Fannie Mae and Freddie Mac currently own two-thirds of all new U.S. mortgages. The entities still have more than $10 billion of outstanding requests for banks such as BofA, Wells Fargo, Citigroup and Washington Mutual (now owned by JPMorgan Chase) to buy back non-performing mortgages.
The banking industry as a whole is estimated to spend $20 billion to $150 billion to buy back loans from Fannie and Freddie.
first tuesday take: While the U.S. Treasury (via its ownership of Fannie and Freddie) is looking out for the taxpayers’ dollars by forcing lenders to buy back bad loans, it is the state Attorneys General (AGs) that are forcing the lenders to reel on the other side of the equation: the reduction of the principal on these bad loans to appropriate home values so homeowners are returned to solvency.
Thus, between the U.S. Treasury enforcing buy back arrangements and AGs demanding cramdown settlements, mortgage lenders are feeling the pressure to take responsibility for the questionable underwriting of these non-performing mortgages. Ultimately, any money they are making from the Fed’s 0% discount rate is now being funneled right back to the government to pay for the misrepresented loans and for losses on the discounting and principal reduction on those loans.
At this point, lender solvency relies entirely on the Fed’s lending policy. Looks like everyone will be looking to settle or forgive debt just to stay in Big Brother’s good graces. [For more information regarding the Fed’s discount rate, see the October 2010 first tuesday article, Deflation’s push on the real estate recovery.]
Re: “BofA reaches $2.8 billion deal with Fannie Mae, Freddie Mac” by Mercury News
Above, the sole reason the bank give me a refi was because I couldn’t get down to 80% loan-to-value. Meanwhile, at the time, there was a government program to help distressed homeowners. It made entirely no sense because I wanted to do something that was not going to lose money for the bank. In fact, my refi would have provided assurance to the bank that I would not foreclose. I don’t understand this world, not that I ever did.
I tried to refinance to a lower principal three times. The loan was originally a Countrywide loan. Banks were entirely unwilling to work with me, despite my 800 credit score and relatively high income. I’m now stuck in a home that’s underwater, and all I want to do is refi to a lower rate. I’m not even asking for a hand out. “Nope” is the answer. It’s people like me who are floating this entire economy. If everybody like me decided to do a strategic foreclosure, the U.S. economy would cave in on itself. The banking industry blows chunks.
Isn’t it great to see the TITANS wrestling each other? GOVT. VS BANKS, BANKS VS GOVT….in this round GOVT wins….Do you really think the banks are going to now truly help us modify the existing loans that working class are willing to pay in full if only the banks will modify payments to a more affordable level? The banks obviously need as much cash as they can gather–that’s where short sales are to their benefit. They need cash today…not over the life of your large mortgage….they need cash now.
I have banked at Bank of America for 25 years….they have handled over 1.5 million of my earnings…may seem small fry to many…but we little people are the ones that grew Bank of America from day one…remember who Bank of Italy served? Bank of America isnt willing to at least temporarily reduce my mortgages to about 75- 80% of the original payment – not even temporary. I am willing to pay those high notes in full because I believe we will have a recovery. I invested for the ”long haul”. My tenants have all suffered unemployment and contributed to my current situation….we are all in the same boat – and the bank is not trying to help us patch up the leaky holes and make ”us” the little people solvent again….the Govt bailed them out with our tax dollars—where’s our true and actual bailout assistance?
Calif. current governor, Jerry Brown, sued WFB’s over their PICK-A-PAYMENT mortgage loans that were inherited with their purchase of WACHOVIA……I don’t see other news that all other major banks have been sued also?
They say to study history to know where we are headed…..do the words ”LET THEM EAT CAKE” indicate anything?
i also feel that there should be compensation made to those wrongly foreclosed on by b of a originally cw loans people that should have been eligible for modification (my mother was even foreclosed on due to her becoming disabled and i even moved in but the bank would not consider my income) the talk is that the individuals should been given the opportunity to make either partial payments or arrearages added to end of loan rather than being forced to qualify and now a bill to reduce principal or arrearages as a write off is infuriating to me as a real estate professional and it seems that some of the minority loans are getting preferential treatment.
Once again, FIRST TUESDAY get’s it CORRECT! Bank of America did not want to acquire COUNTRYWIDE but was FORCED along with MERRYL LYNCH to acquire both entities and BANK OF AMERICA IS STILL PAYING FOR THESE TWO ENTITIES that it was initially told by the U.S. Treasury and the Federal Reserve that the debts would be “GUARANTEED” by the above mentioned federal institutions!