Freddie Mac Files $595M Claim Relating to TBW Loans
Mortgage giant Freddie Mac (FRE) warned in a Securities and Exchange Commission (SEC) filing this week it is working to avoid "significant" losses -- potentially more than $1bn -- related to a now-bankrupt lender/servicer. Freddie estimated its net potential exposure to loan repurchase obligations of bankrupt Taylor, Bean & Whitaker Mortgage Corp. (TBW) at about $500m as of Sept. 30, 2009. In addition of the potential loan repurchase exposure, Freddie said in the SEC filing that TBW received and processed borrower funds that it held as servicer for Freddie's benefit. TBW maintained bank accounts primarily at Colonial Bank, where it deposited borrower funds. Freddie said it filed a proof of claim on $595m against Colonial Bank on Nov. 18, 2009 relating to funds that "should remain" on deposit with Colonial Bank or the Federal Deposit Insurance Corp. (FDIC), which took over Colonial Bank as receiver in mid-August. The funds -- including borrower payments of principal and interest, taxes and insurance received by TBW -- are related to mortgages owned or guaranteed by Freddie and previously serviced by TBW, according to the SEC filing. Freddie eventually terminated TBW's eligibility as a seller and servicer for Freddie loans. Freddie said the losses related to exposure to TBW's bankruptcy "could be significant," although Freddie continues to assess the scope of its exposure. Freddie's $500m net potential exposure to TBW's loan repurchase obligations, combined with the funds relating to the $595m claim against Colonial Bank, indicate total exposure -- and potential losses -- tops $1bn. TBW filed for relief under Chapter 11 bankruptcy following moves by the Federal Housing Administration (FHA) and Ginnie Mae to prohibit TBW from originating new FHA-insured mortgages or Ginnie securities. Taylor Bean’s bankruptcy came after weeks of unrest after Colonial Bank — a major lender to TBW — confirmed it was complying with an investigation into its mortgage warehouse lending facility. Colonial Bank, the former banking subsidiary of Colonial BancGroup, was shut down by regulators and its deposits and some assets were assumed by Winston-Salem, N.C.-based Branch Bank and Trust (BBT). Colonial BancGroup in August filed for Chapter 11 bankruptcy after noting in past filings the possible inability for the company to continue as “a going concern.” Write to Diana Golobay.