Posted on March 23, 2012 by Michael Fleishman

Cash Out Refinance - No More Anti-Deficiency Protections in Arizona

The Arizona Court of Appeals (Division 1 in Maricopa County) just issued an opinion entitled Helvetica v. Pasquan, which addresses the scope of Arizona's anti-deficiency protections in the judicial foreclosure (non-trustee's sale) context. 

The first issue the Court addressed is whether refinancing a purchase money loan forfeits a borrowers' anti-deficiency protection, to the extent that the proceeds from the refinancing transaction were used to satisfy the underlying purchase money obligation.  The Court held that refinancing alone does not destroy the purchase money status and the borrower does not lose the protections of Arizona's remedial anti-deficiency protections.

The Court next addressed the open question of whether a loan that funds construction of a statutorily qualifying residence (as defined in A.R.S. Section 33-729(A)) is a purchase money obligation.  The Court held that a construction loan qualifies as a purchase money obligation if: (1) the deed of trust securing the loan covers the land and the dwelling constructed on the land and the loan proceeds were in fact used to construct a residence that meets the size and use requirements set forth in A.R.S. Section 33-729(A).

Finally, the Court addressed an issue that has been hanging in the balance since 1997, when the same Court decided Bank One, Arizona v. Beauvais, which held that regardless of whether the subject workout note was an extension, renewal, or new obligation, it was a purchase money obligation and the borrower was protected by the anti-deficiency laws.  However, Bank One did not address the propriety of segregating non-purchase money portions of the loan, as Bank One abandoned that argument in that case.

On this issue, the Court of Appeals held that loan proceeds used to construct a qualifying residence (as set forth in A.R.S. Section 33-729(A)) merit anti-deficiency protection under certain circumstances, but those sums disbursed in a loan transaction for non-purchase money purposes may be traced, segregated, and recovered in a deficiency action.

This decision now opens the door for lenders to pursue borrowers who took out money in a refinance and used it for purposes other than the purchase (or construction of a property on vacant land) of a home.  While this decision is limited to judicial foreclosures, as opposed to the trustee's sale context (which accounts for almost all foreclosure sales in Arizona), the logic would seem to apply to the trustee's sale context, but it remains to be seen whether the courts will extend this ruling to the deed of trust statutes.  Stay tuned as always.

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Posted on March 4, 2012 by Michael Fleishman

Pima County Tax Lien Sale - 2012 Update

Pima County just finished up its 2012 tax lien sale.  Pima County offered up nearly 14,000 tax liens over the two day live auction.  One thing was readily apparent this year - the competition for these liens was stiff.  The influx of private equity money into the Pima County sale was obvious.  Competition for $500 liens was nearly unheard of a few years back, but I saw bidding representatives calling out seven and eight percent for liens on manufactured homes in Avra Valley.  In years past, these liens would fetch sixteen percent all day long, but these big money players obviously had money to spend.

Each year Beth Ford, the Pima County Treasurer takes a roll call on whether to continue the live auction format, and each year she maintains the format.  Whereas Maricopa County and many other counties have gone to online auctions, Pima County maintains a live auction.  While some of the well-healed fund managers decried the result of the roll call, there is no question that the live auction format provides for a spirited auction with potentially uncertain results. 

There is not much fun in placing a secret bid and the computer generates the result.  It is far more fun to have someone throw up their paint stirring stick with a bright yellow piece of paper stapled to it with a number on it, yelling eight percent on a lien that they did not even mean to buy.  It is interesting to watch the furious bidding pace when the sale starts and compare it to when people slip into their 2:00 p.m. post-lunch comas - that is when the bidding mistakes can come out. 

It was also interesting to see thirty Richard Kiyosaki (of Rich Dad Poor Dad fame) students roll into the auction on the second day to learn how the whole tax lien process actually works.  In fact, I heard a few people say that one of the these green students signed up for a bidder number and actually bid on a lien only to go over the Treasurer and ask that the bid be reversed - proof that there are indeed pitfalls in tax lien investing and, oh by the way, you don't pick up houses for a couple hundred dollars in tax lien investing, despite what the late-night tax lien seminar peddlers claim. 

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Posted on February 13, 2012 by Michael Fleishman

Arizona Joins the Mortgage Servicer Settlement

Arizona will receive $1.6 billion of the purported $25 billion joint federal-state settlement with the nation's five largest mortgage servicers for their role in wide-spread servicer and foreclosure abuses.  Arizona Attorney General Tom Horne's decision to join the broad settlement also means that his office has reached an agreement with Bank of America over allegations that it has violated an earlier consent agreement that was reached with Countrywide and allegations that Bank of America has systematically violated Arizona's Consumer Fraud Act. 

The agreement requires Bank of America to pay $10 million to the Arizona Attorney General to be used to: (1) avoid preventable foreclosure; (2) mitigate the effects of the mortgage and foreclosure crisis in Arizona; and (3) enhance law enforcement efforts to prevent and prosecute financial fraud or unfair or deceptive acts or practices, and/or provide compensation for harm resulting from conduct alleged in the lawsuit. The agreement also requires Bank of America to pay the Attorney General’s costs and attorneys’ fees incurred in the lawsuit.

Bank of America has also agreed to the following Arizona-specific provisions, which are not included in the broad federal-state settlement: (1) retain an unaffiliated third party to maximize the response rate for loss mitigation programs; (2) confirms that even borrowers who were previously denied for or defaulted on loss mitigation will not be prevented from applying again solely because of the previous denial or default; and (3) requires Bank of Ame to report Arizona-specific information about modifications and other assistance provided to Arizona borrowers.

Arizona’s estimated $1.6 billion share of the global settlement is broken down as follows: 

  • $1.3 billion principally for principal reduction, but also including a menu of other relief to homeowners (how this will actually be implemented obviously remains to be seen).
  • Arizona’s borrowers who lost their home to foreclosure from January 1, 2008 through December 31, 2011 and suffered servicing abuse will be eligible for an estimated $110.4 million in cash payments to borrowers, estimated at approximately$2,000 per borrower.
  • The value of refinancing loans to Arizona’s current, underwater borrowers will be an estimated $85.8 million.
  • The state will receive a direct payment of approximately $102.5 million (yet no mention of what this $102.5 million will be used for).

While the global settlement does not grant any immunity from criminal offenses and will not affect criminal prosecutions, as far as allegations of servicer abuse, including robo-sigining and dual-tracking go, the five largest banks have the green light to push through many of the foreclosures that have been stalled while this agreement was hammered out.  The agreement also does not prevent homeowners or investors from pursuing individual, institutional, or class action civil cases against the five servicers. The pact also enables state attorneys general and federal agencies to investigate and pursue other aspects of the mortgage crisis, including securities cases, which may be the next big fish to land.

The final agreement will be filed in the form of a consent judgment in U.S. District Court in Washington, D.C. and will have the authority of a court order. The consent judgment will require that Arizona’s share of the state’s direct payment be used by the Attorney General to carry out the purposes of the settlement, including to avoid preventable foreclosures, to remedy the effects of the mortgage and foreclosure crisis, and to enhance law enforcement efforts to prevent and prosecute financial fraud and unfair or deceptive acts or practices.

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Posted on February 7, 2012 by Michael Fleishman

The Perpetually Imminent AG Settlement Has Arrived

A long-vaunted settlement arising from the sixteen-month 50-state investigation into faulty bank foreclosure practices, which has perpetually been imminent, has finally concluded.  The deal was struck between federal banking officials, 49 states Attorneys General, and the five largest mortgage servicers - Bank of America Corp., JPMorgan Chase Co., Wells Fargo Co., Citigroup Inc., and Ally Financial Inc, which will release these servicers from liability for robo-signing and other forms of servicer abuse in exchange for a host of financial "penalties."  In addition, nine other unnamed loan servicers may join the settlement later, which will notably increase the overall settlement value.  Loans owned or backed by Fannie Mae and Freddie Mac will not be part of the deal.

Roughly $5 billion of the funds will be used as potential $1,800 - $2,000 payouts to hundreds of thousands of borrowers affected by the abuses and were foreclosed on between the beginning of 2008 and the end of 2011 (sorry we foreclosed, but here's a little check for your troubles).  A portion of this $5 billion will also go to the states, which can use them for legal aid services, foreclosure mitigation programs, and ongoing fraud investigations in other areas

Another $17 billion will be used as "credits" toward writing down principal on roughly one million loans mainly held in by the banks as part of their own portfolios, as opposed to loans there were originated, sold, and securitized.  Officials have said that some of the principal reductions will go toward mortgages held in private-label securities, which means that investors will take some of the hit, even though they would likely take a hit if any of the subject loans went to foreclosure.

Roughly $10 billion of the $17 billion held for principal reduction "credits" will go to borrowers who are delinquent on their mortgages. 

The banks will not get dollar-for-dollar credit for every write-down; reductions on loans bundled in private-label mortgage-backed securities, for example, will be under 50 cents on the dollar, and write-downs for second liens (mostly home equity lines of credit) will be more like 10 cents on the dollare.  Housing and Urban Development Secretary Shaun Donovan has stated that HUD will be able to get between $35-$40 billion in principal reduction in real dollars out of this settlement.  Good luck trying to figure out who exactly is most deserving of the write-downs.  No wonder Oklahoma's AG bowed out of this deal.  The real issue - short changing the foreclosure process has not really been addressed. 

Another $3 billion will be spent on refinancing borrowers who owe more on their mortgage than their home is worth.

As part of the deal, Bank of America will send $1 billion cash to the Federal Housing Administration.  It also appears that Nevada’s and Arizona’s suits against Countrywide and Bank of America for violating its past consent decree on mortgage servicing has been “folded into” the settlement.

California will get $18 billion of the agreement.  New York will receive $648 million in assistance from foreclosure settlement, including $495 million for principal reductions.

New York AG Eric Schneiderman will co-chair a task force with the Justice Department and HUD, reversed his previous decision to not sign onto the foreclosure deal. He was removed from the central negotiation committee last year when he tried to expand the scope of the investigation into securitization and other issues. His task force, along with California AG Kamala Harris and several other AGs, will look into secondary market and other fraud outside of the robo-signing probe.

Also as part of the deal, Schneiderman will not have to drop his suit against the banks for their use of the Mortgage Electronic Registration Systems or "MERS." 

The servicers will send plans to a federal monitor, North Carolina banking commissioner Joseph Smith, who will have oversight responsibilities over the settlement. However, the monitoring process begins with a self-assessment from the banks through quarterly reports, which Smith and a committee can then review. This enforcement process is likely to take months to actually properly assess the settlement.

While this settlement sounds pretty large ($35-$40 billion), which, as David Dayen of Firedoglake points out, is at best, "a guess since the direction of the principal reduction is mostly at the discretion of the banks, pales in comparison to the negative equity in the country, which sits at $700 billion. And the banks have three years to implement the principal reductions, drawing out the loss on their books."  In the end, this is a pretty minor slap on the wrist.  “It’s not new money. It’s all soft dollars to the banks,” said Paul Miller, a bank analyst at FBR Capital Markets. 

Indeed, of the purported $26 billion, the five largest banks only have to pony up $5 billion in cash, which they already had reserves for.  No wonder bank stocks were all up on the news of the settlement.  Some commentators have said that this settlement "is a a stealth bailout that strengthens bank balance sheets at the expense of the broader public."  So the banking oligarchy wins again - shocker.

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Posted on January 30, 2012 by Michael Fleishman

Principal Reduction - Who's Willing to Take the Haircut?

Democrats on the House oversight committee have apparently been pushing to subpoena the Federal Housing Finance Agency ("FHFA") to obtain an analysis looking at what effects principal reductions would have on Fannie Mae and Freddie Mac. 

As HousingWire has reported, FHFA Acting Director Edward DeMarco has long defended the agency's policy of keeping Fannie and Freddie mortgage servicers from writing down principal.  "We have been through the analytics of the underwater borrowers at Fannie and Freddie, and looked at the foreclosure alternative programs that are available, and we have concluded that the use of principal reduction within the context of a loan modification is not going to be the least-cost approach for the taxpayer."  It turns out that Mr. DeMarco's agency has yet to produce an analysis, which was requested last year by Democrats.

Several Democrats have cited a recent White Paper from the Fed allegedly acknowledging the need for principal reduction to coerce borrowers into staying in their home and provide a boost to the overall economy.  However, Fed researchers "admitted the potential benefits would be hard to quantify." 

Given that Fannie Mae and Freddie Mac already owe the Treasury roughly $151 billion in bailouts, it should come as no surprise that many are rightfully concerned about principal reductions, even if the pain of such reductions would be spread across the American populace.  DeMarco believes instead, Congressional action is required to force him to write down principal on loans held by Fannie Mae and Freddie Mac.  Between the two government sponsored agencies, the total of underwater mortgages is currently about $303 Billion.  The estimated loss to both agencies for principal reductions would amount to $101.7 Billion.  The scope of such a principal write down would cause great havoc for Fannie Mae and Freddie Mac's accounting, which would require immediate accounting losses. 

Interesting though, in the third quarter of 2011, servicers cut principal on 10,722 modifications, roughly 7.8% of all workouts during the period, according to the Office of the Comptroller of the Currency.  That is not an insignificant number, given the general reluctance of any servicer to consider a principal reduction.  While this number is interesting, it does not say exactly who is doing the principal reductions.  Either way, Fannie Mae, Freddie Mac, and many, many banks continue to face the specter of continued downward pressure on home prices, which will create additional underwater owners, which creates greater incentive to walk away (especially in non-recourse states).  We are no where close to getting out of the thicket on this one.   

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Posted on January 27, 2012 by Michael Fleishman

Election Year Bravado

A new federal federal task force, dubbed the "Residential Mortgage-Backed Securities Working Group" led by New York Attorney General Eric Schneiderman has sent subpoenas to the 11 largest financial institutions in the past few days as part of its investigation into possible residential mortgage-backed securities fraud. 

Attorney General Eric Schneiderman who was cast off the central negotiation committee of Attorneys General trying to crack down on several securitization issues related to the major banks, seems to be gaining a foothold in his attempt to forge his own settlement with the major banks outside the realm of the federal regulators and AG Tom Miller's crew. 

Schneiderman will be joined by Delaware AG Beau Biden, Massachusetts AG Martha Coakley, Nevada AG Catherine Cortez Masto, California AG Kamala Harris and Illinois AG Lisa Madigan, several of whom refused to bow to continued pressure to try and settle legacy issues surrounding the robo-signing scandal and other securitization issues.

It is very interesting that President Obama allegedly formed this task group, which he announced during his State of the Union address Tuesday.  President Obama has come under increasing pressure to do something substantive about the ongoing foreclosure crisis, which has not been curtailed in the slightest by the introduction of yet another acronym. 

U.S. Attorney General Eric Holder said 15 lawyers and investigators are working with the group. The FBI will add 10 agents, and another 30 lawyers and staff will join the group, along with the

The SEC will also participate. SEC Director of Enforcement Robert Khuzami said there "would be no stone unturned, no dark corner unexposed to the light."

Schneiderman, in a clear shot across the bow to the major banks commented: "We have jurisdiction to go after every aspect of the mortgage bubble and the crash of the financial market . . . We have jurisdiction over every MBS issued over the last decade with Delaware and New York joining the group."

Secretary of the Department of Housing and Urban Development, Shaun Donovan, has also made clear the investigation and ongoing settlement negotiation between other state AGs and mortgage servicers over foreclosure problems would be separate and any charges would not release the banks from liability in the robo-signing scandal.

"It became clear very quickly that Eric [Schneiderman] and I shared a vision that it would be a grave injustice to hold these institutions accountable and potentially have hundreds of billions be paid to private investors and pension funds but not make sure homeowners who hold those loans who depend on being able to get those loans fixed to be able stay in those homes," Donovan said.

Iowa Attorney General Tom Miller, who has been heading up the mortgage servicer investigation, has said the resulting settlement would not release the banks from securitization or lending liabilities.

This is going to produce a very interesting political sideshow as AG Tom Miller tries to keep his band of AG's together, while Schneiderman forges ahead with the new found support of the Obama administration, which it seems only recently, was looking to help the major banks and servicers find a quick settlement to documented abuses that have been alleged by the AG's for some time now. 

The task force represents the Obama administration’s attempt to address complaints from the "Occupy" part of his constituency that it has simply failed to address the housing crisis or bring banks to account for causing it through subprime home loans that were repackaged and securitzed and sold to investors. Critics correctly point out that the Obama administration's attempts to solve the problem through government-sponsored refinancing programs and gentle begging to the banks, have been ineffective.  This is going to be a campaign issue and if the Obama administration is not going to try to spin, the Republicans certainly will.  It has been over three years since the credit crunch in earnest and the housing market had started its full-force downward spiral, and little has changed.  Not surprising to see yet another attempt by the administration to try and appease another part of the base. 

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Posted on December 30, 2011 by Michael Fleishman

Closing Your Loan - Do What It Takes to Get Bank of America's Attention

Anyone who has been involved in dealing with banks in the realm of loan modification have come to accept (at least at some level) that banks move with glacial speed.  Well, for those with a high credit score who actually just want to close a loan - this may be the way to go.....

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Posted on November 1, 2011 by Michael Fleishman

"Independent Foreclosure Review" - Oh, Sorry About That....

Fourteen U.S. mortgage servicers and their affiliates are making available a free, "impartial" Independent Foreclosure Review process (website - Independent Foreclosure Review) to certain of their borrowers, as part of certain consent orders entered into with federal bank regulators, the Office of the Comptroller of the Currency (OCC), the Office of Thrift Supervision (OTS), and the Board of Governors of the Federal Reserve System.

The review process was put into place by the regulators to determine how many borrowers were harmed by faulty procedures including: robo-signing, dual-track foreclosures, and a shortage of qualified staff to work with delinquent borrowers.  The process has been set up to identify customers who were part of a foreclosure action on their primary residence during the period of January 1, 2009 to December 31, 2010. The reviews will span nearly 4.5 million loan files and could take up to a year to complete, according to Acting Comptroller of the Currency John Walsh.

If eligible borrowers believe that they were financially injured as a result of servicer errors, misrepresentations or other deficiencies in the foreclosure process on their primary residence, they can request a review of their foreclosure file to verify that their foreclosure process was handled properly.

An estimated 4.5 million borrowers will be notified by a letter explaining the review process and a Request for Review Form. The mailings will be staggered to better manage volumes in stages beginning Nov. 1, 2011, with an ad campaign to follow. A 1-800 number has been established as well.  A review administrator will allegedly send a confirmation one week after the borrower sends in a five-page request form.

Joe Evers, deputy comptroller for large banks at the OCC, said a remediation plan is still under development to determine how borrowers will be paid. He added that it could take months to figure out how to do that and it was difficult to estimate when a borrower would receive a check.  "It will be a lengthy process," Evers said.

The OCC said it would release the names of the independent consultants soon. The consent orders did leave room for a fine, but Evers said the fine will be determined after the reviews are completed.

So, another government led program aimed at addressing the fallout from the financial crisis brought on by the ramp up of securitization of home mortgages.  It appears that the Independent Foreclosure Review will be a time-consuming procedural morass that has no pre-defined mechansim for determining what remedies will be made available to eligilble homeowners.  Let's hope the various attorneys general are able to reach a substantive settlement with lenders and servicers that has some meat to it.

The list of participating servicers includes:

  • America’s Servicing Co.
  • Aurora Loan Services
  • Bank of America
  • Beneficial
  • Chase
  • Citibank
  • CitiFinancial
  • CitiMortgage
  • Countrywide
  • EMC
  • EverBank/EverHome Mortgage Company
  • GMAC Mortgage
  • HFC
  • HSBC
  • IndyMac Mortgage Services
  • MetLife Bank
  • National City Mortgage
  • PNC Mortgage
  • Sovereign Bank
  • SunTrust Mortgage
  • U.S. Bank
  • Wachovia Mortgage
  • Washington Mutual (WaMu)
  • Wells Fargo Bank, N.A.
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Posted on October 14, 2011 by Michael Fleishman

Hunting Season Has Opened on MERS

The Mortgage Electronic Registration System ("MERS") is increasingly under attack from multiple angles.  MERS describes itself as "an innovative process that simplifies the way mortgage ownership and servicing rights are originated, sold and tracked."  Created by the real estate finance industry, including many of the largest lenders and Fannie Mae, MERS allegedly "eliminates the need to prepare and record assignments when trading residential and commercial mortgage loans."  This bypassing mechanism is what has garnered the attention of recording offices throughout the country.

Geauga County in Ohio just filed suit against MERS alleging that it bypassed the recording of mortgage assignments in local registry offices (as MERS was intentionally designed to do), thereby depriving numerous Ohio counties on revenue from filing fees.

The lawsuit comes only weeks after the Dallas County District Attorney sued MERS and its parent company, Merscorp. Inc., alleging the system acts as a shadow recording system that allows lenders to avoid local mortgage registration fees - this according to HousingWire.com.

HousingWire reports that the suit was filed by David Joyce, prosecuting attorney for Geauga County.

"The MERS business model and practices comply with the recording statutes and regulations of Ohio," a MERS statement of response reads. "This position has been upheld in numerous cases in Ohio courts and countless cases across the country on the state and Federal level. We are confident that MERS’ business practices will be upheld in court as complying with Ohio law."

The complaint also names various financial institutions as defendants – including Bank of American, Chase Home Mortgage, Citi, HSBC Bank, and others, all of whom used MERS to bypass the need to record transfers of the beneficial interest under deeds of trust on properties. 

In the suit, Geauga County claims "the defendants systematically broke chains of land title throughout Ohio counties' public land records by creating gaps due to missing mortgage assignments they failed to record, or by recording patently false or misleading mortgage assignments." The county claims MERS' failure to pay filing fees is a violation of Ohio state laws.

These suits may signal the opening of the floodgates by counties seeking to recoup lost revenue; though one must question the level of damages suffered, as each county also did not have to do the work necessary to receive the money they charge.  Makes me wonder how much it costs to record versus how much they charge for each recording. 

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Posted on September 1, 2011 by Michael Fleishman

The Dirty Dozen Feeling the Heat from the Feds?

When it rains, it pours.  The fallout from the artificially generated housing bubble and the attendant financial crisis is really starting to take hold against the various major players in the banking industry.  It seems everyone with any stake in the mortgage meltdown, from individual home owners to purchasers of mortgage-backed securities, are seeking their pound of flesh from the likes of Bank of America, JP Morgan Chase, CitiBank, Ally Financial, Wells Fargo, UBS, Goldman Sachs, Deutsche Bank, and others.

The New York Times broke the story yesterday that the Federal Housing Finance Agency (FHFA), which oversees Fannie Mae and Freddie Mac, the failed government agencies relegated to taxpayer-backed conservatorship three years ago, is set to file lawsuits against twelve of the major banks.  The suits will argue the banks, which assembled the mortgages and marketed them as securities to investors, failed to perform the due diligence required under the nation's securities laws and missed evidence that borrowers' incomes were inflated or falsified.

The FHFA issued sixty-four subpoenas last year to issuers and servicers of mortgage-backed securities - one of the largest investigations to date of alleged securities fraud stemming from the housing bust.  The FHFA, with subpoena power, has a huge advantage over private investors, which have had a harder time gaining access to the loan files, critical to filing lawsuits against the banksters.  The suits are likely to be filed now because regulators are concerned that it will be much harder to make claims after a three-year statute of limitations soon expires.

In the heyday of loan originations and sales into the secondary market, Fannie and Freddie couldn't purchase those loans directly, but they were allowed to invest in slices of "private-label securities" that were backed by subprime and other risky loans, but were rated as safe AAA investments by the ratings agencies.  Indeed, Fannie and Freddie were among the largest investors in those securities.  Freddie and Fannie began increasing their purchases of private-label securities early last decade in order to boost profits while satisfying government mandates to support affordable housing.  By law, Fannie and Freddie were required to back loans to low-to-moderate income borrowers, and the private-label securities were counted toward those goals. In 2005 alone, Freddie Mac purchased $180 billion in private-label securities, up from $24 billion four years earlier.

In the the lead up to the financial crisis, “the market was so frothy then it was hard to find good quality loans to securitize and hold in your portfolio,” said David Felt, a lawyer who served as deputy general counsel for FHFA until January 2010. Moreover, the private-label securities carried higher yields at a time when the two mortgage giants could buy them using money borrowed at rock-bottom rates, thanks to the implicit federal guarantee they enjoyed.  According to Felt, “Fannie and Freddie thought they were taking AAA tranches, and like so many investors, they were surprised when they didn’t turn out to be such quality investments."  This despite the fact that Freddie was warned by regulators in 2006 that its purchases of subprime securities had outpaced its risk management abilities, but the company continued to load up on debt that ultimately soured.

Fannie and Freddie still hold billions of dollars in mortgage securities backed by more shaky home loans like subprime mortgages, Option ARM and Alt-A loans.  Sadly for the American taxpayer, these securities have been among the poorest performing mortgages.  The U.S. government has spent $141 billion to keep Fannie and Freddie afloat. Freddie Mac allegedly estimates its total gross losses stand at roughly $19 billion, while Fannie Mae allegedly estimates its losses at nearly $14 billion.

While the FHFA has been making noise about pursuing the banks for some time, as Naked Capitalism has reported, "the overarching story remains the same: the more rocks you turn over in mortgage land, the more creepy-crawlies emerge."  In Arizona, when you turn over rocks in the desert, you often find scorpions.  They creep and crawl and they pack a mean sting.  It remains to be seen just how many stingers the Too Big To Fail camp have.

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