DSNews The homepage of the servicing industry
Rep. Darrell Issa (R-California) sent a ""letter"":http://oversight.house.gov/images/stories/Letters/2011-09-15_DEI_to_DeMarco-FHFA_-_Fannie_purchase_of_BofA_mortgage_servicing_due_9-29.pdf Thursday to the ""Federal Housing Finance Agency"":http://www.fhfa.gov/ (FHFA) expressing his concerns and requesting information about an alleged deal between ""Fannie Mae"":http://fanniemae.com/kb/index?page=home and ""Bank of America."":https://www.bankofamerica.com/
[IMAGE]Issa references an August 10, _Wall Street Journal_ article detailing a deal between Fannie and the bank in which the GSE reportedly purchased the mortgage servicing rights of 400,000 troubled loans for $500 million.
The loans are reported to hold a total of $73 billion in unpaid principal balance.
""Fannie Mae's purchase of mortgage servicing rights is worrisome because Fannie, as a government-sponsored enterprise, does not service mortgages,"" Issa stated in the letter.
[COLUMN_BREAK]""In addition, the transaction appears to have shifted a significant amount of risk from BofA's portfolio to Fannie,"" he continued.
In August, when the deal was first revealed, a Fannie Mae spokesperson told DSNews.com, ""Fannie Mae does not directly service loans but has a history of facilitating transfers of portfolios to high touch servicers in an effort to mitigate credit losses.""
However, Issa stated, ""Some commentators have labeled this transaction as a back-door bailout of BofA by permitting the bank to shift part of its risky portfolio to the American taxpayers.""
He also referenced BofA's 40-percent decline in stock value this year, which he credits to the bank's overexposure to troubled mortgages.
""Under these circumstances, I am unclear why the FHFA allowed Fannie to proceed with the transaction,"" Issa stated.
Issa is asking for details of the deal, including Fannie Mae's evaluation of the portfolio. He also asked in his letter if Fannie plans to sell the servicing rights. If so, Issa wishes to know to whom Fannie intends to sell the rights.
Of the 400,000, Issa asked, ""How many of these loans are the same troubled loans that Fannie Mae and Freddie Mac transferred to BofA on January 3, 2011?""
An spokesperson for FHFA told DSNews.com, ""We have received the congressman's letter and will be responding soon.""
