Last week's rank speculation reasonable assumption that the FDIC as receiver of the late, great IndyMac retained the liability for buyback demands made by Fannie Mae was confirmed Sunday by the New York Post ( a bastion of responsible reporting, so we don't doubt its word). According to the Post, however, the buyback liability isn't a measly $1 billion, but a whopping $10 billion. Now you're talking an amount that justifies some hefty billable hours, contract attorneys locked in a fetid document war room, and paralegals bate-stamping the living stuffing out of every document in sight. This is what passes for Paradise in the land of the civil litigator.
Sources close to the buyers tell The Post that the prospective IndyMac ownership team, led by Steven Mnuchin, of Dune Capital, successfully negotiated release from the multi-billion dollar Fannie claim.
Since IndyMac currently services the Fannie mortgages in questions, and collects fees for that service, that means Mnuchin's group got lots of upside in the sweet deal and very little downside.
In this case, money both talked and walked. Usually, only BS does the latter.
Of course, the fact that the FDIC faces a whack of $10 billion in loan buybacks calls into question the initial $9.4 billion estimate of ultimate potential loss to the FDIC on the resolution of IndyMac.
Bert Ely, managing director of Ely & Co., said the eleventh-hour move by Fannie to push back mortgage loan liabilities to the FDIC has to increase pressure on the agency's fund "simply because of the magnitude" of the dollars involved.
My man, Bert, again. That guy's in the paper more than Lindsay Lohan.
As the article points out, a $10 billion additional loss to a $34.6 billion FDIC insurance fund is a serious "haircut." Nevertheless, FDIC is sticking by its original estimate. They must know something we don't, which, come to think of it, would include them among the vast majority of the world's population.
As I said in my last post, it's hard to pick an emotional favorite in this Godzilla vs. Mothra face-off. On the other hand, I tend to get misty-eyed when banks are injured, so to that extent I'd have to root for the FDIC, unless the loss would come out of Sheila Bair's termination "golden parachute."
I trust the press will keep on top of this war of the titans. Popcorn, anyone?
H/t Housing Wire
