GSEs (Fannie/Freddie),FHA&HUD

Freddie Mac-Taylor Bean Settlement to Yield Pennies on the Dollar

Posted on Monday, July 4, 2011

Freddie Mac has entered into a proposed settlement with the now defunct Taylor, Bean & Whitaker Mortgage Corp. (TBW) and the creditors’ committee appointed in the lender’s bankruptcy proceeding.
Under the terms of the agreement, Freddie Mac will be granted an unsecured claim in the TBW bankruptcy estate in the amount of $1.022 billion, the GSE disclosed in a filing with the Securities and Exchange Commission.
Freddie Mac says that total represents its exposure to past and future loan repurchases, but the mortgage financier estimates that it will only see between $40 million and $45 million from that claim.
The plan of liquidation and disclosure statement filed with the court by TBW indicates that general unsecured creditors are likely to receive a distribution of 3.3 to 4.4 cents on the dollar, Freddie explained.
According to the regulatory filing, the GSE will also be entitled to approximately $203 million on deposit in certain TBW bank accounts relating to the company’s mortgage loans. The FDIC as receiver of Colonial Bank, which went under in 2009 as a direct result of the fraudulent activity going on at TBW, has already handed over $150 million of this amount to Freddie. In addition, the GSE will receive other mortgage loan receipts estimated to be $6 million.
But under the proposed settlement, Freddie must pay a total of $61 million to TBW and the trade creditors represented by the creditor’s committee to settle their potential claims against the GSE.
“We continue to estimate our uncompensated loss exposure to TBW to be approximately $690 million, but our ultimate losses could exceed this estimate,” Freddie Mac said in the SEC filing.
In 2009, TBW was shuttered after federal law enforcement authorities raided the lender’s Ocala, Florida office. It soon came to light that TBW had been running a multi-billion dollar scheme that involved selling non-existent and duplicate loans that were owned by other lenders to Freddie Mac.
At least seven high-ranking executives from TBW and Colonial Bank have been convicted on federal charges or pleaded guilty to participating in the fraud scheme.
The proposed settlement between Freddie and TBW was filed with the Bankruptcy Court for the Middle District of Florida last week and is subject to the court’s approval.
By: Carrie Bay DS NEWS




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