Part of what caused the collapse of the housing market was toxic mortgages. Mortgages are assets, too; a bank or loan lender can sell a mortgage to another party as a dividend paying instrument. Some bank loans went to individuals that wouldn’t have qualified with basic scrutiny, and some people’s mortgages went sour because of circumstances. Fannie Mae and Freddie Mac were sold lots of these lending options. When the lending options went poor, those businesses went bad. Few of these bad loans are being bought back by the banks that sold them.
Buy back is required on demand
It seems fair that if bad mortgages were sold on the market and seriously damaging the corporations that bought the bad finance loans, those loans should be bought back. Not only is it morally fair, it’s legally allowed. In fact, legislation has guaranteed payday loans can be bought back by the vendor in the event the lending options become troubled. Freddie Mac and Fannie Mae bought a lot of those mortgages. However, the repurchases that are owed by law are not taking place.
No redress of defective assets
However, the toxic assets are not being bought back. Freddie and Fannie have been asking for a refund from the businesses that sold the mortgages to them, according to USA Today, and about $11 billion worth is being sold back. Of those defective loans, a 3rd have been waiting to be tackled for at least 90 days. Those aren’t the only companies that purchased those securities. Other lending options were backed by the Federal Housing Administration and the Veterans Administration.
That is really counterproductive
A bank or loan company that refuses to buy back these lending options is only harming itself. Tax dollars are what is keeping Freddie and Fannie afloat, and companies and individuals who work in those companies pay taxes. The executives and employees of the financial institutions and other companies that won’t repurchase the assets may have to pay taxes until the debt for Freddie and Fannie is paid off.
USA Today
usatoday.com/money/economy/housing/2010-09-15-fannie-freddie_N.htm
