“If we are to get the housing market working again, it’s our opinion that the FHFA and the government-sponsored enterprises need to stop punishing banks for their lending practices from several years ago, even though they may have a legal right to do so,” Miller wrote.

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U.S. Must ‘Stop Punishing Banks,’ Halt Putback Claims, FBR’s Miller Says

U.S. government-backed firms and agencies should “stop punishing banks” and suspend demands for mortgage repurchases because they are impeding an economic recovery, according to Paul Miller of FBR Capital Markets & Co.

Repurchase losses may total $121 billion, wrote Miller, a former federal bank examiner, in an analyst’s note to clients dated today. He previously said the tally might range from $54 billion to $106 billion. Losses for Bank of America Corp. (BAC) could reach $66 billion in some scenarios, he wrote.

Fannie Mae, Freddie Mac, the Federal Housing Authority and the Federal Housing Finance Authority “are acting in their own self-interest as opposed to that of the broader U.S. economy,” Miller wrote. Their claims “drain capital from the banking system, and they cause banks to overly tighten credit standards, which pushes potential home buyers onto the sidelines.”

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