Thursday, September 13, 2012

Freddie Mac to recover billions extra from loan reviews: regulator


Freddie Mac will recover up to $3.4 billion more from banks after closely scrutinizing soured loans it bought during the housing boom, a regulator's watchdog reported on Thursday.
The report comes after Freddie Mac agreed last year to settle with Bank of America Corp over bad loans the bank sold to the housing finance company in the runup to the mortgage crisis. The watchdog, the inspector general for the Federal Housing Finance Agency, later raised concerns about how Freddie Mac reviewed loans for potential buybacks by the bank.
After making changes, government-owned Freddie Mac will now collect more money back from banks, according to Thursday's report by the inspector general for the FHFA, which regulates Freddie Mac and Fannie Mae.
Banks grant mortgages loans to customers and then sell them on to Fannie Mae and Freddie Mac, which packages them as securities for investors. If the loans go bad, the institutions can ask banks to buy them back if there were defects in the underwriting of the loans, such as missing financial statements or fudged appraisals.
In January 2011, Bank of America reached a $1.35 billion settlement with Freddie Mac to resolve current and future loan repurchase requests. The pact covered loans sold by Countrywide Financial, which Bank of America bought in 2008. But in September 2011, the inspector general found Freddie Mac's review process for repurchase requests was lacking.

Read more: http://www.reuters.com/article/2012/09/13/us-housing-loanrepurchases-idUSBRE88C05420120913

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