We all know that the foreclosure system is a complete mess, and a lot of the reason is because the secondary mortgage market of Fannie Mae and Freddie Mac, bought loans from banks that never should have been underwritten. In effort to make home ownership available to everyone, standards diminished to a state that they never should have. These loose standards lead to the housing bubble, and bubbles always pop when they get too big.
Well… according tot his article on Broker Agent News, the FHFA is now trying to do things to make banks buy back some of these loans…. This will have an
FHFA is looking to offload its losses onto the financial institutions that sold them to Fannie and Freddie. Now, they have enlisted the services of some high powered attorneys to assist with the process.
For example, FHFA recently retained the firm of Quinn Emanuel (QE) to jump start its investigations. Using its expertise in business and banking litigations, QE has already subpoenaed JP Morgan Chase and has put Bank of America on notice for $47 billion dollars in poorly serviced loans. This investigation is broad ranging, as the FHFA is not solely pursuing institutions that sold mortgages to Fannie Mae and Freddie Mac, but also private label financiers who eventually packaged and sold mortgage backed securities to investors on Wall Street. As it stands today, banks and mortgage companies could be forced to buyback over $179 billion in soured mortgage products. To date, Fannie and Freddie have forced banks to repurchase over $6 billion in mortgages, and an additional $16 billion will be forced back on the banks in the next 12 months. During the boom years of 2006 and 2007, Fannie/Freddie purchased over $200 billion in subprime loans, of which the majority have gone sour. The FHFA is seeking to force repurchases on these mortgages too.
via Broker Agent Social Network – Preston Howard’s article – Here Come the Bank Buybacks.
If the bank buy back lawsuits are successful, this could cause major changes from Logan Utah Real Estate to Real Estate in Charlottesville Virginia. Banks would take a huge hit, and the banking system as we know it could be undone…. If only we could just go back in time, and prevent the abnormal real estate buying behavior from every happening.
But if the world was stable and consistent all the time, I would have a lot less content to blog about..