Fannie and Freddie Farce: How the Securities Brokerage Firms Are Using the Names of the GSE’s as Cover for False Claims

There are lots of false assumptions about The Government Sponsored Entities. First, just because they are called “Government sponsored” doesn’t mean that the Federal Government is actually backing all of their activities. But the vagueness of their actual business plans enabled the Obama administration to nationalize them in order to facilitate the creation of a resting place (see Maiden Lane ventures) for all the toxic mortgages and toxic “certificates” that had been sold to unsuspecting borrowers and investors.

The other assumption — equally erroneous — is that Fannie and
Freddie ever owned the debts of many borrowers who assumed that
because the names of Freddie and Fannie were invoked that they were
involved.

There were occasions where Fannie and Freddie actually paid cash. One
was where they had to pay the guarantee which was in fact backed by
the Federal government. But they were covering losses in that scenario
and not buying the debt. The foreclosure had already occurred, many
times with the court thinking that this was Fannie and Freddie
foreclosing. It wasn’t. The other was some payments in cash for
certificates issued in the name of REMIC trusts (by investment banks
doing business as the name of the “Trust”). Again The GSEs were not
buying debt, they were buying securities.

In most cases Fannie and Freddie were acting as Master Trustees
representing the sub trustees of named REMIC trusts that actually
didn’t exist primarily because neither the “trust” nor the investment
bank (securities brokerage firm) had ever received ownership of the debt. The investment bank had caused the loan to be funded through conduits but it had not received any conveyance of ownership of the debt and did not carry the loan as a receivable at all or at most it held the receivable for thirty days.

So the conclusion reached by anyone who bothers to learn the details of all this is simple: Fannie and Freddie were used as  cover for making false claims. All the securitizations schemes depended upon nobody owning the debt because that would make them lenders subject to liability for violation of Federal and State lending laws. And that is why all the documents in foreclosure are fabricated: they are solely intended for use in foreclosures and nowhere else.

The most basic black letter law in this country governing civil matters is that you can’t get a remedy in court unless you have been injured by some action or inaction of the defendant. If you don’t own the debt then you are not injured.

It is the securities brokerage firms (investment banks) that created this scenario without the knowledge, consent or even acquiescence of borrowers or investors. Neither borrowers nor investors should be required to pay for a flawed scheme that deprived both classes (investors and borrowers — of a fair share of the enormous profits created by making bad loans.

5 Responses

  1. I like this conversation. Need more of this…differing sources of information.

  2. Bob G.

    I get it that Fannie and Freddie supposedly buy loans to move them off primary lenders books and keep the money churning, and before 1998 that was likely how they operated…

    I have never seen an actual sale or assignment with Fannies name have you? And since we’re talking about securitized loans made in the 2000’s with 99% of them in error (non-compliant with federal law regarding borrowers rights and necessary disclosures) as they don’t refer to the ACTUAL lender but purposely name a non-party as the lender on the note I must conclude that while you worked at Calpers (or wherever) you did not in fact buy mortgage backed bonds. It seems as if you bought into the lie… as evidenced by the Obama era bail out/cover up of Fannie/Freddie ineptitude.

    Fannie and Freddie certainly did ABSOLUTELY NO DUE DILIGENCE as was proven by the Colonial Bank fiasco… You bought smoke and mirrors…

  3. FNMA & FHLMC were taken into Conservatorship on September 6, 2008. FNMA & FHLMC Mortgage Bankers Association and the 5 Big Banks started MERS INC. Each of the members resold the same loan over and over endlessly taking placing profits and storing them offshore and in holding companies. This hurandious Greed cost Pensions and Investors to lose everything. Billions of homes were illegally foreclosed on. No injury of losses could legally be claimed. All documents were created to foreclose. Each home created major illegal profits for these greedy entities that started Mers Inc. There were at one time 5,000 members to create illegal multiple sales on each home. The profits far exceeded the amount of loans. Most members of which is the Shadow Banking System lost their Licenses to Lend for illegal gotten gains through counterfeiting and money laundering. Tearing up their Licenses and keeping their illegal profits. FHFA currently oversees the GSE’S. FHFA states that the GSE’S are never a creditor on any individual loan. All of this is available to read. Mers Inc. needs to go or land ownership rights are over and the United Nations Agenda 21plan WINS. We lose our Borders , Land, Rights, Freedoms, Liberties, Guns, Free Speech the Right to Vote etc… No Constitution just the United Nations rulings. Ask Britain EUROPEAN UNION and Australia how they like being ruled by the UN. Time to take back America before it’s too late.

  4. Someone in a very high government position said to me –“You are right, all the loans in the private label MBS (PLMBS) were originally reported as in default, but how are you going to prove they were NOT in default?”

    I could not do that. Could only show for mine. I COULD show a place to start for this info. But went to the “top” – who said “NO.” .

    Before these “bank” put on the security underwriter hat, they were servicers for Freddie and Fannie. They could report whatever they wanted and not even ever tell you. .

    I know I said this before here — The Community Reinvestment Act demanded that banks fund loans to low/middle income America and then sell the loans to the GSEs. The banks did not like that. There was nothing in it for them. So, they complained to Congress. Then they became very quiet. They figured out a way to satisfy the CRA, and earn profits for them, and give better profits for the GSEs who were stuck with fixed rate loans. They reported the loans in default to GSEs, told borrowers – we will give you a refinance (which was actually just a reinstatement), claimed to package the reported (default) loans into PLMBS, and sold the top tranches back to Freddie/Fannie. who placed those PLMBS into their own REMICs. But they were even smarter than this, they took some loans (largely those who had equity) and placed into “certificates” that were not offered for security sale (or sold back to F/F) and kept them for themselves, or made a nice profit selling to third party.

    And, then the market crashed. Investors? They were bailed out for principal, but they could no longer reap high profits because the low/middle income class could not, obviously, pay the high rates that they the investors would never pay themselves. Home prices collapsed, and people, rightfully then actually defaulted.

    If you disagree — let me know. I do take criticism, and always open to what others have to say. Very hard to know what I was told, and not be able to do anything about it.

  5. Fannie was created in 1938, Freddie in 1970. These GSE’s BUY MORTGAGE LOANS on the secondary market. They do not compete with originators. That was a condition of their charters. I have documentary proof that they bought loans that I have been involved with and presently am involved with. And in addition to that documentary proof, you can also go online to see if they own YOUR LOAN. Having worked at a $100 billion public pension fund, I can tell you that we bought hundreds of millions of dollars worth of Fan/Fred common stock and their bonds (not their MORTGAGE LOANS). And we wouldn’t have been buying them, nor would Fan/Fred been selling them if they didn’t own the mortgage loans backing their common stock and corporate bonds.

    There seems to me to be an increasing number of “Joe Biden” moments in some of these posts.

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