Fannie, Freddie Parent Files Strawman Objection Against BAC Settlement - Sole Purpose Is To Strengthen The Settlement

Tyler Durden's picture

The FHFA filing an objection to the Bank of America settlement? Forget about it. After all should BAC implode upon having to fund another $50 billion in mortgage putback claims, and Countrywide have to be spun off and nationalized, it would simply mean that more capital would flow away from the already insolvent GSEs and to a totally new branch of taxpayer funded RMBS. Which is why are confident that the latest objection filed against the BAC settelement is merely there to weaken the case, or as Manal Mehta puts it: a Cover Your Ass filing because "they’ve pre-determined the conclusion and then will do the bare minimum discovery until they can jump ship and undermine the efforts of the rest of the objectors." Why else would anyone file a "conditional objection" whose sole purposes is " to reserve its capability to voice a substantive objection in the unlikely event that necessity should arise." Unlikely? Obviously this is Bank of America's higher power interest already doing all they can to prevent an out of control situtation getting even worse. Which after all is the whole point of why the Fed, Pimco, BlackRock et all filed the lawsuit in the first place: to ring-fence the total amount of cash outflow claims, instead of allowing Bank of America to experience death by a thousand lawsuits. In this regard, tonight's FHFA filing is nothing more than a wolf in plaintiff's clothing doing what they can to weaken the case against undoing the settlement.


Federal Housing Finance Agency Action Regarding  Court Consideration of Proposed Bank of America Settlement


The Federal Housing Finance Agency (FHFA), in its capacity as conservator of Fannie Mae and Freddie Mac (the Enterprises), today filed an Appearance and Conditional Objection regarding the proposed settlement between Bank of America and a consortium of 22 investors being considered by a court in New York. This pleading was filed to obtain any additional pertinent information developed in the matter. The conservator is aware of no basis upon which it would raise a substantive objection to the proposed settlement at this time. In fact, FHFA considers it positive that the proposed settlement includes subservicing requirements, specific terms for the servicing of troubled mortgages and the curing of certain document deficiencies. Additionally, FHFA is encouraged that a number of significant market participants support the proposed settlement.


Due to its duty to preserve and conserve Enterprise assets, the conservator believes it prudent not only to receive additional information as it continues its due diligence of the proposed settlement, but also to reserve its capability to voice a substantive objection in the unlikely event that necessity should arise.




The Federal Housing Finance Agency regulates Fannie Mae, Freddie Mac and the 12 Federal Home Loan Banks. These government-sponsored enterprises provide more than $5.7 trillion in funding for the U.S. mortgage markets and financial institutions.

Full filing below:


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IMA5U's picture

And that's why Buffet got a sweatheart deal on BAC and QE3 chatter dominates the media.


It is all just a smoke screen so people do not focus on this reality

tekhneek's picture

N-o-v-e-m-b-e-r P-U-T-S.

moonstears's picture

Why, I did just that, today, got me some Nov BAC Ps at $7.50 strike! I hope to fuck you're smarter than me, as we're thinkin' the same, and I KNOW "me"!

macholatte's picture


It's another stall, posturing, a game of file a motion and keep the litigation in limbo for another 30, 60, 90 days. More legal fees. BAC probably has 20-30 days to respond and then another 20-30 days to be heard by the court and then another 10-20 days to get an order written and signed off and so on and so forth. No settlement likely before Spring 2012.

IMA5U's picture

a sinking stock price can force the issue faster.  BAC's credit spreads will continue to blow out and the rest of the banks will follow.

Joebloinvestor's picture

Wanna bet Warren sells after the election when Barry (if they don't stuff the ballot box) is gone?


Sometimes even preferred share holders take a kicking.

IMA5U's picture

he won't sell.  that 5bn gives him more leverage over the government for more sweatheart deals.

spanish inquisition's picture

So government bail out money goes in to rescue banks. Banks need additional help. Uncle Warren goes in to rescue banks with presidential guarantees and leaves with boatloads of governement laundered money.

Robslob's picture

General Motors anyone...its whats for dinner!

Rollerball's picture

I'll warrant you Warran T Smorgasbord has preferred warrants.

Sequitur's picture

This was exactly my thought when reading the other filing in yesterday's ZHedge post. This latest post is important. Yesterday's filing was devoid of any substance. It was a token placeholder.

Now look at this one by FHFA. No one files an objection and puts as their leading paragraph praise for the very settlement they are objecting to. The only thing that matters in this document is the last sentence phrase: they are formally preserving their ability to speak up when it's time for the court to rule. And the FHFA can say and file anything it wants (read: ordered to say by the Administration, Buffet, Bank of America, and the banking cabal).

The politics surrounding this attempted cramdown must be immense.

chunga's picture

Translation: taxpayers stuffed with the tab, bonuses for TBTF, govt. enablers get their vig and enhance their CVs for when they move into the "private sector". Oh yeah...homeowners due process down the tubes as a delightful creamy topping.

MachoMan's picture

How the fuck is this not a per se violation of fiduciary duty/loyalty?  You can't eat your cake and have it too.  Either taxpayers got had via the GSEs and this shit has to get put back on the assholes up the chain OR the federal government has to expressly admit that the entire matter is a sham and that the GSEs are in fact going to hold the toxic sludge in a bailout to the banks, no matter the cost, and taxpayers will be forever damned (and they'll need a legal argument for how they're allowed to do so).

Federal False Claims Act?  Qui Tam?

This is complete and total bullshit.  As stewards and recipients of federal funds and guarantees, they have no ability to do anything other than to seek putbacks and/or rescission of the agreements whereby toxic sludge was put onto their books...  If the assets had appreciated in value since their transfer to the GSEs, I could understand wanting to keep them...  but we all know the opposite to be true...  and, as a result, there can be no basis for anything other than seeking to completely rid themselves (the GSEs) of the burden.


chunga's picture it! Qui Tam baby. There are a few going on now but are being kept very quiet!

MachoMan's picture

I can't do shit as I don't have a client with non-public information...  presuming this is even the type of thing covered by that...  I would think it's a possibility when the salesman is the originator, etc.  Of course, with TARP, etc., I'm not sure how that would work given the federal government can't sue itself...  incestuous bunch of dinglehoppers.

On a side note, I've got a gut lock on the state for a gigantic amount of money if the freaking supreme court wouldn't have dumbassed the FFCA to hell and prohibited the federal government from suing the states under it.  What the hell does separation of powers have to do with a situation where the federal government gives the states money?  If nothing else, it's basic contract law.  Unless of course the courts fuck it up.  The dissent was hilarious...  can't remember the case though.  Just remember the dissent basically took a shit on the majority.

topcallingtroll's picture

This one fact alone should convince everyone that we are ruled by an oligopoly.

Seriously isn't it time to start hanging some people?

Catullus's picture

Perhaps it's time to start lining up CUSIP numbers on bonds issued by countrywide and public pension funds. You know, just to see who is being ring-fenced out

unununium's picture

Chromosomes are aligning inside BAC, and parties are lining up outside, positioning themselves for the unholy shit-supernova.


moonstears's picture

Fellow ZHers, I'm a lowly, self described, armchair economics expert :]. Many of you are surely much bigger picture experts...actual econ experience and legends outside your own minds, unlike myself, so please answer the following: If BAC can borrow at .25 % at the discount window, why pay uncle Warren 6%??????  

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