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Foreclosure-Gate: BofA Freddie Mac Putbacks Resolved for 1¢ on $

• Ritholtz.com
 
Bank of America settled numerous claims with Fannie Mae for an astonishingly cheap rate, according to a Bloomberg report. A premium of $1.28 billion was paid to Freddie Mac to resolve $1 billion in claims currently outstanding. But the kicker is that the deal also covers potential future claims on $127 billion in loans sold by Countrywide through 2008. That amounts to 1 cent on the dollar to Freddie Mac. Imagine if you had a $500,000 mortgage, and you got to settle it for $5,000 — that is the deal B of A appears to have gottem from Freddie Mac. B of A also paid $1.52 billion to Fannie Mae to resolve disputes on $3.1 billion in loans (~49 cents on the dollar). They remain liable for $2.1 billion in repurchase requests, as well as any future demands from Fannie Mae. My biggest complaint about the GSEs post government takeover is that they have been used as a back door bailout of the banks. This latest deal reconfirms that view. Its a wonder B o A didn’t rally further than the 6.7% it surged yesterday . .

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