(CN) — A federal judge has ordered the government to turn over documents related to its decision to permanently divert billions of Fannie Mae and Freddie Mac profits from investors to the U.S. Treasury following their $188 billion bailout in 2008.
Fairholme Funds is an investment fund run by Bruce Berkowitz. Mr. Berkowitz was named domestic equity fund manager of the decade by Morningstar Inc. in 2010, but since then his fund has massively underperformed the S&P 500 by nearly 12 percent annually, according to Seeking Alpha.
Part of the fund’s losses are due to its large holdings in Fannie Mae and Freddie Mac.
Value of preferred shares of the mortgage giants has dropped by more than half since Fairholme lost its federal lawsuit challenging the government’s 2012 amendment to the 2008 bailout terms. The amendment diverted Fannie and Freddie profits to the U.S. Treasury and eliminated dividends that normally go to private investors.
Investors described the amendment as requiring “Fannie Mae and Freddie Mac to pay a quarterly dividend to Treasury equal to the entire net worth of each enterprise, minus a small reserve that shrinks to zero over time.”
Here is the court document. Click here.
The ghost of Taylor, Bean & Whitaker struck again Friday, asPricewaterhouseCoopers agreed to settle a $5.5 billion lawsuit that accused the company of failing in its audits duties by not discovering the accounting malfeasance that led to one of the most spectacular crashes to come out of the housing crisis.
The news of the settlement comes courtesy of Reuters, which reported that the lawsuit stemmed from PwC’s auditing work at Colonial Bank, which provided funding to TBW originate mortgages.
TBW was, at one time, the largest privately held mortgage company in the U.S., employing over 2,000 people. TBW originated, serviced and sold mortgages in pools toFreddie Mac.
Mortgage servicers looking to get their hands on some Fannie Mae and Freddie Macmortgage servicing rights have that opportunity, as $2.8 billion in Fannie and Freddie MSRs just hit the market.
According to MountainView Servicing Group, which is acting as the exclusive sale advisor, the portfolio features the mortgage servicing rights on 12,713 loans with an average loan size of $223,765.
In what is already being called a “blow to shareholders,” by John Carney of the Wall Street Journal, a federal court in Virginia ruled Tuesday that a Freddie Macshareholder does not have the right to inspect the government-sponsored enterprise’s financial records, thanks to the conservatorship agreements that went into effect when the government took over Freddie Mac and Fannie Mae.
The United States District Court for the Eastern District of Virginia tossed out a lawsuit brought against Freddie Mac by Tim Pagliara, who sought to review the GSE’s books in an attempt to prove that the government is illegally taking the profits of Freddie Mac and Fannie Mae from shareholders.
Pagliara is the CEO of CapWealth Advisors, the leader of Investors Unite, an organization that seeks to protect the rights of all the investors that own shares in Fannie and Freddie, and a prominent member of “#FannieGate”, a viral movement on Twitter that has become shorthand for the government’s supposed theft of Fannie and Freddie.
Law360, New York (August 22, 2016, 7:20 PM ET) — The Second Circuit on Monday refused to rehear its decision tossing a roughly $1.3 billion penalty against Bank of America for a financial crisis-era mortgage program, rejecting a request by the U.S. Attorney’s Office in Manhattan, which said the ruling overlooked important evidence.
The appeals court rejected the government’s request for a rehearing pushing back against a three-judge panel’s May finding that it hadn’t presented enough evidence that Bank of America subsidiary Countrywide Financial and a former executive had defrauded Fannie Mae and Freddie Mac. (Credit:…
Regulator’s stress test subjects companies to severe downturn
Companies would still have $132 billion in funding remaining
Fannie Mae and Freddie Mac could need as much as $125.8 billion in bailout money from taxpayers in a severe economic downturn, according to stress test results released Monday by their regulator.
The Federal Housing Finance Agency said that the government-controlled companies, which back nearly half of new mortgages, would need at least $49.2 billion.
The annual test, required by the Dodd-Frank Act, is likely to be used both by proponents of allowing Fannie Mae and Freddie Mac to build capital and by those who think there’s not an urgent need for the government to take that move.
(CN) — An Ohio retirement fund can sue Freddie Mac for claims it concealed a $2 billion loss on risky mortgages from investors before a 2007 financial report sent its stocks reeling, the Sixth Circuit ruled Wednesday.
The Ohio Public Employees Retirement System, also known as OPERS, sued the Federal Home Loan Mortgage Corporation in January 2008, alleging that the government-sponsored mortgage broker lied about the number of subprime loans it purchased in 2006 and 2007.
Following the release of a financial statement revealing a $2 billion loss on Nov. 20, 2007, Freddie Mac’s stock dropped 29 percent in one day, resulting in shareholder losses of over $6.6 billion.
In its complaint, OPERS claimed “the drop in [stock] price ‘confirms empirically that the market was previously unaware of the full extent of Freddie Mac’s exposure to, and risk from, non-traditional mortgages.” Freddie Mac blamed the price drop on the financial crisis.
U.S. District Court Judge Benita Y. Pearson ruled for Freddie Mac, citing several of the mortgage giant’s annual reports in her opinion, pointing out how their disclosures run counter to OPERS’ argument.
“Before November 2007, Freddie Mac had already disclosed that it was increasing its purchase of non-traditional mortgages products that may default more often,” she said.
But the Sixth Circuit disagreed Wednesday, ruling that OPERS had adequately alleged Freddie Mac misled investors about the qualities of its loans and rigors of its underwriting process.
Here is the court document. Click here.