Freddie Mac has agreed to pay $53.5 million to the bankruptcy estate of Taylor Bean & Whitaker Mortgage Corp. to settle a threatened lawsuit by creditors of the disgraced mortgage lender.
The settlement resolves a number of other lingering disputes between Freddie and Taylor Bean, the bankrupt Florida mortgage lender that serviced many of the mortgages that Freddie Mac owns before collapsing under the weight of a multibillion dollar fraud in the summer of 2009.
Under the deal, the terms of which were outlined in a filing in U.S. Bankruptcy Court in Jacksonville, Fla., Freddie Mac will get $150.3 million on deposit at Colonial Bank in return for the payment to Taylor Bean.
Much of the Freddie Mac settlement, some $34.3 million, is earmarked for the real estate lending arm of French bank Natixis under a separate agreement.
Taylor Bean was once among the largest originators of mortgages insured by the Federal Housing Administration. In addition to issuing loans, it serviced them, collecting payments from borrowers on behalf of the owners of the loans, including Freddie Mac.
Creditors had said they might sue Freddie Mac for unpaid servicing fees and to recover certain mortgage repurchase payments made to Freddie.
Bankruptcy law allows a debtor in Chapter 11 to unwind so-called fraudulent transfers within a certain time of a bankruptcy filing if they provided no benefit to the business and the debtor was insolvent at the time the transfer occurred.
At one time Taylor Bean serviced nearly $51 billion of Freddie Mac mortgages.
Freddie Mac estimates it faces $690 million in losses as a result of the Taylor Bean collapse, according to regulatory filings.
That figure doesn't include the potential claims that creditors of Taylor Bean's Ocala Funding mortgage conduit might assert against Freddie. Those claims could total $840 million, according to Freddie Mac.
The Ocala conduit was a key element in what federal prosecutors claim was a seven-year, multibillion dollar fraud orchestrated by Taylor Bean founder Lee Farkas and which brought down Alabama's Colonial Bank. A federal jury convicted Farkas of bank fraud in April, and he is set to be sentenced this week.
Freddie Mac and its larger rival Fannie Mae were seized by the federal government in September 2008 under a process known as conservatorship.
The Florida mortgage lender filed for bankruptcy protection in August 2009 after federal regulators froze its accounts and suspended its authority to make loans insured by the government. Taylor Bean was forced to shut its doors after federal regulators and the FBI raided Taylor Bean's Ocala, Fla., offices.