BOA Settles W/ Freddie

Posted by kevin on December 4, 2013 under Foreclosure Blog | Comments are off for this article

Freddie Mac buys mortgage loans either for its own portfolio or for sale to investors. Under the terms of these purchases, Freddie has the right to put back the loan to the originator if it is found that the loan does not meet the standards set forth in the purchase agreements. The so-called “put back” loans defaulted because, for the most part, the loans were made to people who could not afford to repay them. That is the essence of predatory lending.

As of September, 2013, Freddie Mac had $1.4 billion in put back loans that were previously owned by BOA, and they wanted BOA to take them back. The settlement reached has Freddie Mac receiving $404 million.

This is not the first time that BOA has settled with Freddie Mac. In January, 2011, BOA made a $1.35 billion settlement over loans sold by Countrywide which was acquired by BOA in 2008. Moreover, BOA recently settled with Fannie Mae for over $11 billion.

Why is BOA settling for these vast sums of money? Well, the standard line is that they want to cut litigation costs and move on. While both statements are technically true, my take is that a primary motivating source in the settlements is that BOA (and other settling banks) does not want the government conducting a methodical and in depth investigation into its lending practices. That would uncover “irregularities” that make everything else look like child’s play.

Let’s play a little detective. Did you ever ask why there was widespread robo-signing of documents which included everything from people signing other people’s name on endorsements and assignments on thousands of documents to outright forged endorsements. I would say the question is, why were these notes not endorsed at the closing or shortly thereafter? I mean, the banks and investment houses had all the best legal minds in their stables telling them exactly what to do and when to do it. Do you really believe they all collectively dropped the ball on doing something as simple as signing an endorsement on a note or signing an assignment of mortgage?

I have been in the trenches for 4 years fighting foreclosures. I have seen a lot of “stuff”, both from the banks and the courts. Perhaps, I have become a bit jaded. But one question that I ask, over and over again, is, ‘was there a reason that the banks and investment houses allegedly did not endorse notes until they were robo-signed just before the foreclosure action was filed? Well, here’s one theory. Banks and investment houses are required to borrower billions of dollars daily at the repo desk. To get their hands on that kind of money, they have to put up collateral. A note that is endorsed to someone else or in blank cannot be used for collateral. But if, by chance (or not by chance), you had notes that were made out to you but not endorsed to a third party or in blank, perhaps, just perhaps, those notes could be used as collateral at the repo desk. Who would know the difference?

That would be a massive fraud. It would make Bernie Madoff look small time. Now, I am not saying that this happened. But, what I am saying is that there has to be a reason that BOA and other banks and investment houses are paying millions and more often billions of dollars in settlements, right and left. There has to be a reason that they do not want any in-depth discovery of their paperwork or e-work. It is not because of a few predatory loans.

Think about it. Then ask yourself, why aren’t the courts and the feds asking this same question?