By Peter Schroeder - 01/11/11 08:39 PM EST
On Jan. 3, Bank of America agreed to pay $2.8 billion to Fannie Mae and Freddie Mac over 787,000 loans sold to them in 2008 by Countrywide Financial, which was then taken over by the bank.
In the aftermath of the housing crisis, the GSEs have been pressing mortgage lenders to buy back faulty loans that went south, dragging down their portfolio with losses, after they found they did not conform to proper lending guidelines. Fannie reached an earlier agreement with Ally Financial Inc. where the bank agreed to pay $462 million to cover potential buybacks of $292 billion mortgages.
But Waters, who suggested earlier this month that the deals could amount to "backdoor bailouts," wants to know if the agreements represented the best possible deal for taxpayers. The GSEs have been held in federal conservatorship since September 2008 and have received roughly $134 billion in taxpayer money to stay afloat.
"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 in the letter sent to FHFA acting director Edward DeMarco.
Waters was joined on the Jan. 7 letter, released Monday, by Reps. Brad Miller (D-N.C.), Keith Ellison (D-Minn.) and Stephen Lynch (D-Mass.).
The lawmakers say that since Fannie and Freddie are pushing for similar settlements in other banks, the first agreements could set an "important precedent."
The agreements have been generally well-received on Wall Street — Bank of America's stock received a boost following the announcement. But that warm reception suggests the settlement "was merely a slap on the wrist that sets a bad example for other negotiations in the future," Waters said in a statement after the Bank of America deal was announced.
The lawmakers are giving DeMarco until Jan. 24 to provide information explaining how the settlement terms were reached.