Anyone surprised? Under current policy, Fannie and Freddie exist and function solely to absolve TBTF banks of liability and fraudulent assets.
WASHINGTON — Freddie Mac employed a faulty analysis when the government-owned firm struck a deal to receive $1.4 billion from Bank of America Corp. as part of a settlement over problem mortgages it purchased from the big bank, according to a watchdog report released Tuesday.
The settlement was over claims that Bank of America misrepresented the quality of home loans its acquired Countrywide Financial sold to Freddie Mac between 2005 and 2007. The deal covered 787,000 loans with a total unpaid principal balance of $127 billion, the bank noted at the time.
It added that FHFA senior management may have inaccurately estimated the risk of loss to Freddie Mac and that the issue could “potentially involve substantial losses to Freddie Mac.” Already Freddie Mac and Fannie Mac have cost taxpayers some $130 billion.
Freddie Mac management, according to a memorandum, made a deliberate decision not to change sampling procedures in order to maintain relationships with loan sellers such as Bank of America.
The report did note that FHFA suspended future settlements premised on the Freddie Mac loan review process.
Complete history of the Fannie & Freddie disaster...
Video - Former Fannie Chief Credit Officer Edward Pinto