Feds Hit Wall Street Firms With Subpoenas Seeking Documents Related To Crappy Mortgage Securities Bought Buy Fannie, Freddie w/ View To Force Buy-Back

The New York Times reports:

• The [Federal Housing Finance Agency] announced last Monday that it had issued 64 subpoenas to a throng of unidentified financial services institutions, seeking documents related to mortgage securities that Fannie and Freddie bought from Wall Street during the boom years.

• The subpoenas are designed to tell the agency what many of us want to know: How did Wall Street package and sell private-label mortgage securities to investors, even though the nature and quality of some of the loans crammed inside those tidy little packages were, at best, suspect?

• Once that question has been answered, Fannie and Freddie can force the institutions that sold the securities to repurchase the improper loans, allowing taxpayers to recover some of the losses they’ve swallowed on Fannie’s and Freddie’s federal bailout.

***

• During 2006-7, these entities bought $294 billion of so-called private-label securities. Not all of these purchases are under scrutiny, the agency said. It is clearly turning up the heat on the major players in mortgage servicing and securitization. Among the bigger trustees in the business are Deutsche Bank and the Bank of New York, while loan servicers include Bank of America and many more. None of the banks would confirm if they had received subpoenas.

For more, see Holding Bankers’ Feet to the Fire.