Categorized | Finance and Mortgage

Freddie Mac May Have Improperly Handled Loan Reviews

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Freddie Mac’s lawsuits against many of the nation’s major banks and lenders may have taken a serious hit if the most recent reports regarding their handling of loan reviews are accurate. According to third party independent sources, Freddie Mac may have incorrectly handled the loan reviews during the purchase of millions of dollars of bad loans from the banks.

The firm is currently suing many of the major banks on the basis that they sold the bad loans under the guise that they were legitimate, causing the government take over of Freddie Mac. However, if the current reports are legitimate, it may have been Freddie Mac’s own failure to engage in the proper procedures that led to the purchase of the bad loans that dismantled the firm.

The reports state that Freddie Mac failed to engage in all recommended loan review procedures, and as such, did not do enough to detect problems with the loans that they were buying. The data indicates that the firm failed to review mortgage loans older than two years old under the premise that most defaults occur in those first two years. As such, they bought millions, and possibly even billions of dollars in bad loans.

Spokesmen from Freddie Mac have responded to the report, claiming that any further investigation of the loans at the time would have adversely affected business relationships that they had with the various banks, and was not a realistic possibility at the time. However, the firm reviewed less than ten percent of the bad loans, and it is that negligence that may work against them with respect to their current lawsuits.

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About Drew Wilson

Drew focuses on the Commercial and Mortgage/Finance categories.

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