Rep. Brad Miller is raising questions about Bank of America's settlement with the government over soured mortgage-backed securities, asking whether the government got the best deal for taxpayers.
In a letter to the agency that oversees Fannie Mae and Freddie Mac, Miller and three other Democratic lawmakers asked for details on how the government reached settlements with Bank of America and Ally Financial over the repurchase of mortgage-backed securities. The settlements, announced by the government in a one-page news release on Jan. 3, were worth a total of $3.3 billion. Most of that — about $2.8 billion — came from Countrywide Financial, a California mortgage lender bought in 2008 by Charlotte-based Bank of America.
Since the fall, banks have been facing increasing pressure to repurchase mortgage-backed securities they sold to investors in the height of the housing boom. As these securities have soured, investors have asked banks to buy them back — at a loss for the banks. Fannie and Freddie's agreements with Bank of America and Ally could represent the first of many such deals between investors and banks.
In the letter to the Federal Housing Finance Agency, or FHFA, Miller and the others question whether the $3.3 billion settlement represents "the real liability" that Fannie and Freddie bear "as a result of the misrepresentations and breaches of warranty" by the two banks. "Specifically, we request information on how the FHFA determined that the combined $3.3 billion settlement represented the best possible recovery of funds available to taxpayers," the letter said. In addition to Miller, it was signed by Rep. Keith Ellison of Minnesota, Rep. Stephen Lynch of Massachusetts and Rep. Maxine Waters of California.
Fannie and Freddie, which teetered near collapse in the midst of the financial crisis, have been under government control since fall 2008.
Miller, a Raleigh Democrat who has been critical of the banking industry, also asked for more information about the FHFA's announcement that it had resolved two subpoenas against Ally over securities sold to Fannie Mae. In July, Fannie and Freddie issued 64 subpoenas to "various entities" over the mortgage-backed securities they had bought, but declined to say who they were issued to. The FHFA said this month that it is still pursuing claims against "a range of counterparties," but a spokeswoman declined to give details.
Bank of America spokesman Rick Simon said the bank's repurchase agreements with Fannie and Freddie were done in "a fair and responsible manner" and are "a step toward the ultimate recovery of the housing market." "By putting these issues behind us, we can increase our focus on serving customers and helping distressed homeowners facing difficult times," he added.
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