Freddie Mac Discloses Additional Exposure To Failed Lender
By Jessica Holzer, Of DOW JONES NEWSWIRES
WASHINGTON -(Dow Jones)- Freddie Mac (FRE) has notified investors of certain
additional losses it could face in connection with failed lender Taylor, Bean &
Whitaker, which serviced loans owned or guaranteed by Freddie before it went
bust in August.
In a filing with the Securities and Exchange Commission Monday, Freddie Mac
said it made a claim in court last week for $595 million in borrower payments it
said were deposited by Taylor Bean on its behalf at Colonial Bank. The funds
include borrower payments of principal and interest as well as taxes and
insurance funds Taylor Bean received on such loans.
Taylor Bean, once the 12th-largest mortgage lender in the U.S., relied on
short-term funding from Colonial. The Federal Deposit Insurance Corp. seized
Colonial Bank less than two weeks before Taylor Bean filed for bankruptcy.
In the filing, Freddie said it is working with the FDIC and Taylor Bean to
quantify other potential exposures it has to the mortgage lender. Taylor Bean
never appointed a bankruptcy trustee, so the company is representing itself in
the negotiations.
Freddie previously estimated that it has up to $500 million in net exposure to
Taylor Bean in connection with loans the company sold to Freddie Mac that
subsequently proved not to meet Freddie's underwriting standards. Under certain
agreements with Freddie, Taylor would have been obligated to buy back such
loans.
Freddie said it can't estimate its total exposure to Taylor Bean at the moment
but that the additional losses "could be significant."
-Jessica Holzer, Dow Jones Newswires; 202-862-9228; jessica.holzer@
dowjones.com
(END) Dow Jones Newswires
11-23-091803ET
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