Subpoenas Withdrawn: Ally (GMAC, owned by USA) to Pay Fannie (owned by USA) $462 Million for “BuyBacks”

COMBO Title and Securitization Search, Report, Documents, Analysis & Commentary COMBO Title and Securitization Search, Report, Documents, Analysis & Commentary

COVER-UP CONTINUES

EDITOR’S COMMENT: Confused? Ally, wholly owed by GMAC, which is 80% owed by our Federal government has agreed to pay $462 MILLION on “repurchase demands” (i.e. legal damages) to Fannie Mae (FNMA, wholly owned by our Federal Government) for losses attributable to $292 BILLION in “home loans.” There, that settles it. Any questions?

And by the way, those subpoenas that were issued last July, they are withdrawn because of this “settlement.” So any answers to the inside workings of Fannie or the transactions with Ally and “related parties” will forever be buried unless you know enough to subpoena them yourself. Find the subpoenas on the internet and plagiarize them to your heart’s content, there being no copyright protection on legal filings.

Are they kidding? That payment is 2 tenths of 1% of the home loans. Are we to suppose that those loans were 99.8% “OK”? SO here is a very good example why both lawyers and homeowners need litigation support in the form of analysis of title and securitization. Otherwise you are up against representations from the Federal government that ring with a presumption of truth instead of stinking with the mess of a lie. Pretender lenders will use it at leisure to smoothly show that your allegations simply have no merit and that you are wasting the court’s time on a  foreclosure that is right and justified and should not wait because creditors have a right to protection in the courts from unscrupulous homeowners who are out to undermine the system. Most judges WANT to believe that anyway because it seems like the fastest way to clean out their docket.

The government has settled with itself. It has taken the trouble to announce the settlement so presumably they are trying to make a point. I think the point is to minimize the financial crisis and hide the scope of crises that have not yet occurred but look like they are virtually assured. Because it isn’t just that all the mortgages are of dubious origin and authenticity, it isn’t just that the notes that are described in the mortgages fail to describe the actual obligation that arose, and it isn’t just that Fannie’s claim of ownership is based upon self-serving proclamations; no, the point here is that the mortgages are very probably unsecured, and the mortgage bonds based upon allegations of ownership of these loans are very probably worthless or nearly so.

Speaking to the traders out there who are not interested in any of the policy issues, some of us know that there is a hedge or bet here that is going to surface and sink this ship once and for all, while you guys make all the money AGAIN. And because nobody is looking, you can probably do so without fear of legal intervention or regulation because the old rules and laws probably exempt you and your trade as not subject to securities laws. At worst they will shut the barn door after the building is completely evacuated of all sign of life. I really can’t blame you for being so cynical. The only people who have a clue about what you are doing are not in any position to do anything about it except write lame duck articles like this one.

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“Ally Financial Inc., the auto and home lender majority-owned by the U.S. government, agreed to pay $462 million to settle repurchase demands from Fannie Mae linked to $292 billion in home loans.”

Bloomberg:

By Hugh Son and Lorraine Woellert – Dec 27, 2010 10:00 PM MT Tue Dec 28 05:00:03 GMT 2010

Ally Financial Inc., the auto and home lender majority-owned by the U.S. government, agreed to pay $462 million to settle repurchase demands from Fannie Mae linked to $292 billion in home loans.

Ally, formerly known as GMAC Inc., said the deal covers loans serviced by GMAC Mortgage unit for Fannie Mae before June 30 and mortgage-backed securities purchased by the Washington- based loan-funding firm. The accord was reached on behalf of Ally’s Residential Capital unit and subsidiaries, the Detroit- based company said yesterday in a statement.

Chief Executive Officer Michael Carpenter is seeking to resolve claims tied to faulty mortgages as he prepares Ally for a public offering to repay U.S. bailout funds. Mortgage lenders typically promise to buy back loans sold to investors or cover losses if information about the borrowers or property later proves to be incorrect.

“At the start of 2010, we set a goal to substantially reduce risk in our mortgage operation,” Carpenter, 63, said in the statement. “We have successfully completed a series of steps toward that objective and are largely complete.”

The government took an almost 80 percent stake in Fannie Mae after it seized the firm in 2008.

Ally had settled buyback claims with six counterparties, the largest being government-owned finance company Freddie Mac, according to a November presentation. It agreed in May to make a one-time payment to Freddie Mac, without disclosing the amount.

Ally’s Reserves

Ally increased reserves for buybacks to $1.1 billion in the third quarter, from $855 million in the prior period. The original unpaid principal on loans involved in the Fannie Mae settlement announced yesterday was $292 billion, a figure that narrowed to $84 billion, Ally said.

Chris Katopis, executive director of the Association of Mortgage Investors, said his members are worried the Ally settlement might be too low.

The deal “may set a harmful precedent for mortgage investors and the public,” Katopis said in an interview. The Washington-based trade association represents state pension funds and other investors in mortgage-backed securities.

The agreement “modestly” exceeds prior reserves, Ally said. ResCap and Fannie Mae also reached an accord regarding ResCap’s payment of mortgage-insurance proceeds where coverage is rescinded or canceled.

“ResCap does not expect this exposure to be material,” Ally said.

Subpoenas Issued

In July, Fannie Mae’s regulator, the Federal Housing Finance Agency, said it issued subpoenas for documents related to private-label mortgage-backed securities in which Fannie Mae and Freddie Mac had invested. The agency, under pressure from lawmakers to stem losses to the two companies, is trying to determine whether misrepresentations or omissions might require lenders to repurchase failed loans.

The FHFA will withdraw subpoenas to “certain ResCap parties” that relate to Fannie Mae, Ally said today in a filing to the Securities and Exchange Commission. FHFA spokeswoman Stefanie Johnson declined to comment.

With more than $150 billion in taxpayer funds spent on bailing out Fannie Mae and McLean, Virginia-based Freddie Mac, lawmakers are pressing them to shift more of the burden back to the banks that created defective loans.

In an August letter to President Barack Obama, Representative Barney Frank, the Massachusetts Democrat who leads the House Financial Services Committee, said the battle to get refunds “should be fought with every tool.”

“We are pleased to have reached an agreement with Ally Financial Inc. and related entities which addresses our exposure on a portfolio of loans sold to Fannie Mae by GMAC Mortgage or serviced by GMAC Mortgage,” Janis Smith, a spokeswoman for Fannie Mae, said in an e-mailed statement. “The agreement also addresses Fannie Mae’s potential claims for losses on certain private label securities issued by GMAC entities.”

To contact the reporters on this story: Hugh Son in New York at hson1@bloomberg.net; Lorraine Woellert in Washington at lwoellert@bloomberg.net.

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