Last Tuesday, Minyanville ran an article I wrote calling for someone in Congress to ask questions about the Bank of America/Fannie Mae servicing deal that went down in early August. On Thursday, there was finally some action when Rep. Darrell Issa sent a letter to FHFA asking about the Fannie Mae deal.
We first wrote about this back on August 10, and then added more comments a month later. In short our complaint is that there is no transparency here. FHFA and Fannie will not disclose how much they bought the MSRs for, and it is unclear why Bank of America did not put the MSRs up for a public bid. (Our sources indicate that at least 5 to 6 financial institutions were given a chance to do due diligence on the MSR portfolio that Fannie Mae bought, but the MSRs were sold before anyone could bid.)
It smells like a bailout of Bank of America—taking the risk of their balance sheet with an overpriced bid. But As FHFA Acting Director Ed DeMarco countered to Issa's letter, Fannie could be just trying to mitigate its risk by putting the MSRs in the hands of a better servicer (a possibility we suggested here). To find out, we need clarity—which is what the Issa letter demands:
"Congress and the American people deserve a full explanation for what appears to be yet another bailout paid for by taxpayers benefiting businesses that made bad business decisions."
Issa's letter then has 12 good questions FHFA should promptly respond too.
See the Issa letter here.
See this op-ed for full details.
See this interview last Tuesday evening for even more: