January 11, 2012

Sen. Moura Calls For Fannie/Freddie Forum

Patrick Laverty

State Senator Beth Moura (R - Cumberland/Lincoln) put out a press release calling for a forum with top executives of Fannie Mae and Freddie Mac, the federal governmentally backed financial entities that securitize mortgages for the servicing banks.

Moura's allegation is that Fannie and Freddie aren't working with many distressed Rhode Island homeowners to refinance a mortgage and instead prefer to send the property to foreclosure, add more red ink to their books and then go to the federal government for bailout money.

Moura says, “I believe they are intentionally creating these huge losses in mortgage defaults so they can justify on paper their requests for hundreds of billions in taxpayer money. The longerthey take to review modification applications, the further behind the homeowners end up, the higher the arrearage gets, the larger the investor loss appears, therefore making a modification that much harder to qualify for. The perfect storm has been created.”
Moura wants the top executives of these firms to come to Rhode Island and disprove her allegations and evidence. She claims to have "notes, files and homeowners from Westerly to Woonsocket" ready to testify.

We'll wait to see if she is able to get a response from either of the finance giants.

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I believe there is something in Senator Moura's allegations. Although some might think so, Fannie and Freddie are not, and never have been, in the lending business. These are skills unknown to them. They are simply bureaucrats who oversaw adherence to the "seller's guide". During the S&L crisis I tried to get a copy of the Seller's Guide, wasn't gonna happen. To them a "work out" probably means going to the gym.

Corporately, they probably see a "bailout" as their only salvation. This would generate little interest in any other solution.

Posted by: Warrington Faust at January 12, 2012 10:54 AM
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