The nation's largest banks have an obligation to pay some of the cost for bailing out mortgage buyers Fannie Mae and Freddie Mac because they sold them bad mortgages, a government regulator said Wednesday.
Edward DeMarco, the acting director for the Federal Housing Finance Agency, said the banks this summer have refused to take back $11 billion in bad loans sold to the two government-controlled companies, in written testimony submitted for a House subcommittee hearing Wednesday. A third of those requests have been outstanding for at least three months.
DeMarco said the banks have a legal obligation to buy back the loans and called the delays "a significant concern." He said the government may take new steps to force those buybacks if "discussions do not yield reasonable outcomes soon."
. . . it has cost taxpayers about $148 billion so far.
. . . Fannie and Freddie have a legal right to return bad loans, especially if they later discover fraudulent statements on applications. Any money they recover offsets their losses.
If the banks have a legal obligation to buy back bad loans, the government should insist the banks buy back their junk mortgages. Doing anything else is throwing away the taxpayers' billions.