NEW YORK (
) --The Federal Housing Finance Agency's
could end any hope for President Obama to broker a quick
between the states, the federal regulators and the banks.
And that will prevent a bottoming of the housing market, thus delaying an eventual start to a housing recovery. Meanwhile any plans for the large banks to increase their lending, or offer significant balance reductions to spur mortgage loan refinancing at low rates, are also likely to be stifled.
This leaves the president with little hope for any positive economic news in time for the November 2012 election.
President Barack Obama
Nancy Bush, a financial analyst and contributing editor at SNL Financial, said that the FHFA's bombshell announcement heading into Labor Day weekend left her "aghast at the lack of coordination among the various housing regulators and other authorities."
Bank of America investors are sure to be confused. After all, the bank on Dec. 31 reached mortgage putback agreements with
, agreeing to pay $2.8 billion to the government-sponsored enterprises.
Of course, Friday's FHFA lawsuits are different, as they involve private-label mortgage-backed securities that were sold to the GSEs. But such large lawsuits, with a total of over $57 billion in mortgage-backed securities putback demands against Bank of America -- including claims for securities sold by Countrywide and Merrill Lynch before those companies were acquired by BAC -- are bound to leave investors reeling on Tuesday. It will also stifle banks' risk-appetite.
Bank of America's previous $8.5 billion settlement of Countrywide mortgage putback claims from institutional investors is unsettled, with a flurry of lawsuits announced this week, including filings by the
Federal Deposit Insurance Corp.
, and a subsidiary of
Mortgage giants Fannie and Freddie were placed into government receivership nearly three years ago with the Federal Housing Finance Agency as their overseer. The FHFA is required by law to "recover taxpayers' money" from any party that may have ripped-off the GSEs. Then again, the banks being roasted were, for the most part, the same ones that were bailed out by the federal government through the Troubled Assets Relief Program, or TARP, which the president supported.
Maybe the president could have done an end-run around the FHFA, by working with Republicans in Congress to pass a bill that would have prevented the Friday Night Massacre.
Regardless, with the flurry of lawsuits against Bank of America this week will likely leave nation's largest lender a little gun shy, which won't bode well for the economic recovery.
is facing an FHFA lawsuit demanding $33 billion in mortgage-backed securities putbacks, which is also a bitter pill.
With his big pet healthcare project long behind him,
, it is long past time for President Obama to turn his attention to the housing and mortgage mess, but his long delay probably means it's too late for a housing settlement to save his presidency.
Written by Philip van Doorn in Jupiter, Fla.
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Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.