As a House Financial Services subcommittee looks ahead to an oversight hearing on the Federal Housing Finance Agency (FHFA) next month, several House Democrats are calling on the FHFA to use its authority to recover money from companies that they say used deceptive practices to shift losses to Fannie Mae and Freddie Mac.
In recent months, the government-sponsored enterprises (GSEs) have been aggressively forcing lenders to buy back loans that do not satisfy contractual warranties and representations. Last week, Fitch Ratings estimated that the four largest banks alone have received repurchase requests totaling $10.7 billion from the main housing GSEs.
On Friday, Reps. Barney Frank, D-Mass., and Paul E. Kanjorski, D-Pa., released letters to the White House encouraging the FHFA to continue efforts to limit taxpayer losses stemming from the GSE conservatorships. The letters were co-signed by Reps. Brad Miller, D-N.C., and Jackie Speier, D-Calif. To date, the two enterprises have drawn $145 billion in taxpayer funds.
‘In winding down Fannie Mae and Freddie Mac, we must carefully craft a solution that stabilizes our mortgage markets and ensures the continued availability of reasonably priced loans and affordable housing opportunities for all Americans,’ Kanjorski said in a statement. ‘Simultaneously, FHFA must continue its efforts to protect taxpayers by recouping funds from the underwriters of faulty mortgages and the issuers of underwater securities purchased by Fannie Mae and Freddie Mac.’
Last month, the FHFA issued 64 subpoenas to obtain information needed ‘to determine whether losses sustained by the enterprises on [private-label securities] are the legal responsibilities of others.’ According to the congressmen's letters, the FHFA issued the subpoenas after trying for months to obtain the documents voluntarily.
The FHFA appears to be considering claims similar to the claims asserted by private mortgage investors against issuers of private-label mortgage-backed securities, the lawmakers say, adding that the efforts by private investors to pursue those claims have been largely stymied by the inability to obtain the kind of information sought by the FHFA subpoenas.
Fannie Mae and Freddie Mac own approximately $255 billion in non-agency mortgage-backed securities.
SOURCE: Office of Rep. Paul Kanjorski