BINGO! THE SMOKING GUN in the lead-up to the financial crisis. F&F had mandatory quotas to meet in satisfying HUD requirements for Affordable Housing Goals. F&F sought to meet these requirements by purchasing the minimum number that were mandated by HUD. Banks rewarded rating agencies that fraudulently gave the highly coveted AAA loan ratings with future/continuing business. F&F were FORCED to buy these sub-prime, alt-A, no doc loans in order to satisfy Gov mandated Affordable Housing Goals. "Homes for all policies" set by our Gov through HUD were the root cause of the 2008 financial/housing crisis. F&F were not the cause, they were only trying to meet bad policy that was FORCED on them. I've been saying this for 2 years now. It's all in the FCIC Report. Glad to see a bank standing up to this massive Gov cover-up and taking them to trial. The cover's about to come off beginning 16 March 2015.
FHFA’s lawyer explained in a recent filing that a “bench trial clearly would conserve time and assets.” That may be true. But when the defendant is a large multinational bank and the government doesn’t want to face a jury in this era of public anger at big banks, that tells you how much confidence the feds have in their case.
They’re right to be worried. In a filing last fall, counsel for Nomura said that Fan and Fred not only went shopping for pools of mortgages. Nomura offered evidence that the politicized twins sought to ensure that the particular mortgages in the pools would help them meet affordable housing goals set by the federal Department of Housing and Urban Development.
In other words, while many investors might try to avoid risky loans to people with low credit scores, Fan and Fred were doing the opposite. They sought risky loans to please their political partners, even as they enriched themselves with fat interest-rate yields.
According to the Nomura filing, “To enable Freddie Mac and Fannie Mae to meet HUD’s requirements, broker-dealers provided them with loan-level information about the pools of loans from which private label securitizations were to be created. As Fannie Mae’s Paul Norris explained, ‘the whole collateral pool was ours to carve out.’”
It’s even possible that Little Orphan Fannie and her cousin Freddie knew more about the risks of such loans than the banks assembling them into securities. According to Nomura’s lawyers, “In selecting the loans that would be included in the loan groups supporting tranches they intended to purchase, Freddie Mac and Fannie Mae carefully analyzed loan-level data, including property addresses, to ensure that the loan pools underlying their certificates included as many goal-qualifying loans as possible.”
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