A group of House Financial Services Democrats are raising questions about whether taxpayers will be fully protected under the terms of a recent settlement over poorly underwritten loans held by Fannie Mae and Freddie Mac.
In a letter to acting Federal Housing Finance Agency (FHFA) director Edward DeMarco, Reps. Maxine Waters, Brad Miller, Keith Ellison and Stephen Lynch asked for details surrounding the terms of a combined settlement of $3.3 billion from Bank of America Corp. and Ally Financial to cover their repurchase obligations to the government-sponsored enterprises for faulty loans.
"We are writing to request some clarity on whether the agreements announced on Jan. 3 between the enterprises and two counterparties — Ally Financial and Bank of America — represent the real liability the Enterprises bear as a result of the misrepresentations and breaches of warranty made by these institutions," said the lawmakers in the letter which was dated Jan. 7 and released Tuesday.
Lawmakers demanded details on how the FHFA determined that the settlement represented the best possible recovery of funds available to taxpayers and how subpoenas for Ally Financial were resolved. They asked whether Ally provided loan level or collateral file data to FHFA, and how that information was used to arrive at the $462 million settlement figure.
"While we understand that many of the details in this settlement may include proprietary information, we believe that this is a matter of critical importance to the public interest and that transparency is therefore essential," the letter said.
Lawmakers requested a response by Jan. 24 and said they had urged President Obama to nominate a permanent FHFA director.
Obama nominated Joseph Smith for the job last year but Republicans led by Sen. Richard Shelby, R-Ala., blocked his confirmation. It is unclear if he will be renominated.