You remember the announcement that Fannie and Freddie would have an “unlimited” credit line from Treasury to cover shortfalls and buy-outs of defaulted loans from MBS, right?
After the Fannie news came out this weekend, a friend called me and his brother works for Chase Mortgage. He told me that Chase is redoing stated income loans and instead of actually appraising the home, they are going back 3 years on the homes valuation in order to get the loan processed. Then they are selling these mortgages to Fannie Mae.
Yes, that’s an anecdotal claim, but if true can someone explain to me how this isn’t out-and-out fraud?
Is Fannie requiring the actual appraisal with the loan package information they buy, or is the entire “verification” nothing more or less than a checkbox that says “yes, we have an appraisal”?
Toxic waste dumping ground? Maybe.
But one thing is certain – I’ve not heard of Fannie and Freddie forcing putbacks of loans they purchased from various brokers and originators where there was fraud in the original loan.
Why should Fannie and Freddie eat this if in fact the banks breached their reps and warranties in the original tender of the paper?
And since it appears that banks have been tremendously successful in shoveling off garbage paper to Freddie and Fannie while not being held to account for their activity, one has to wonder if this anecdotal report is accurate!