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DOW JONES NEWSWIRES: US House Democrats Question Mortgage Buyback Terms

January 11, 2011
In The News

By Alan Zibel

Four U.S. House Democrats are raising questions about whether taxpayers are getting enough compensation for bad loans sold to Fannie Mae (FNMA) and Freddie Mac (FMCC).

The two government-controlled mortgage companies have recovered $3.3 billion for taxpayers by reaching settlements in recent weeks with Bank of America Corp. (BAC) and Ally Financial Inc.

Rep. Maxine Waters (D., Calif.) questioned in a letter dated last Friday whether the settlements with those two companies "represent the real liability [Fannie and Freddie] bear as a result of the misrepresentations and breaches of warranty" made by Bank of America and Ally Financial. The letter was released Tuesday by Waters's office.

Waters wrote the letter to Edward DeMarco, the acting director of the Federal Housing Finance Agency, which oversees Fannie and Freddie. Joining Waters were three fellow members of the House Financial Services Committee, Reps. Brad Miller (D., N.C.), Keith Ellison, (D., Minn.) and Stephen Lynch, (D., Mass.).

"We request detailed information on how FHFA determined that the combined $3.3 billion settlement represented the best possible recovery of funds available to taxpayers," the lawmakers wrote.

A spokeswoman for the FHFA said the agency will respond to the letter.

Bank of America agreed last week to pay $2.8 billion to Fannie Mae and Freddie Mac to buy back soured mortgages. In late December, Ally Financial agreed to pay Fannie $462 million to cover repurchase requests related to its mortgage unit.