Freddie Mac is trying to prevent Bank of America Corp. from probing its business relationship with the failed lender Taylor Bean & Whitaker Mortgage Corp. in an investigation that Freddie Mac said would ring up a tab of $10 million or more.
Freddie Mac is urging the federal bankruptcy court in Jacksonville, Fla., not to allow Bank of America to carry out the investigation. “The breadth of the discovery sought by BoA is so vast that Freddie Mac estimates that it will cost at a minimum $10 million to provide the discovery sought,” Freddie Mac said Thursday in court papers. “BoA seeks to unfairly shift the cost of compiling and providing such records to Freddie Mac by means of a broad ‘fishing expedition.’ ”
Bank of America is seeking access to Freddie Mac’s books and to question its officials about the mortgage finance company’s “extensive business relationship” with Taylor Bean. Before Taylor Bean collapsed last year, it was one of the largest originators of mortgages insured by the Federal Housing Administration and also serviced billions of dollars worth of Freddie Mac mortgages.
While Taylor Bean won court permission earlier this year to conduct such a probe, Bank of America said the company has not pursued the investigation and that Freddie Mac had not produced “a single document,” thus requiring the bank to launch its own probe.
But Freddie Mac said Bank of America’s request, in which it’s joined by BNP Paribas SA and Deutsche Bank AG, would “disrupt the orderly process” that the bankruptcy court had established. Freddie Mac said it has cooperated with the investigation.
Freddie Mac also questioned the motives of the banks’ bid to conduct their own investigation, accusing them of improperly using the proposed probe to further a lawsuit that BNP Paribas and Deutsche Bank brought against Bank of America over the fate of more than $1.25 billion in cash and mortgage loans tied to a Taylor Bean subsidiary.
A bankruptcy judge is slated to rule on the dispute at a June 18 hearing.
Taylor Bean, of Ocala, Fla., filed for Chapter 11 bankruptcy protection last August, a few weeks after shuttering its lending operations amid allegations of fraud and the revocation of its right to make FHA-insured loans.