Fannie Mae’s new CEO will reportedly recuse himself from decisions involving the mortgage giant’s dispute with Bank of America over billions in loan repurchase requests.
Timothy Mayopoulos will take over as Fannie Mae CEO on June 18, three years after joining the company’s management team. Before joining Fannie Mae, Mayopoulos was executive vice president and general counsel of Bank of America Corp.
According to its most recent quarterly report to investors, Fannie Mae had $7 billion in outstanding repurchase requests with Bank of America as of March 31, including more than $3 billion in requests which were overdue by 120 days or more.
Bank of America was the recipient of the lion’s share of $12.1 billion in total Fannie Mae repurchase requests, followed by JPMorgan Chase Bank ($1.2 billion), CitiMortgage ($955 million), Wells Fargo Bank ($797 million) and SunTrust Bank Inc. ($380 million).
Lenders must typically repurchase loans on foreclosed properties, or reimburse Fannie Mae for losses if it is determined that the mortgage loan did not meet underwriting or eligibility requirements, if loan representations and warranties were violated, or if mortgage insurers rescind coverage.
Bank of America and Fannie Mae disagree on whether a multi-billion dollar settlement in 2010 also applies to more recent repurchase claims, HousingWire reports.
"Clearly one of the things that we at Fannie Mae need to do is work through our differences with BofA," Mayopoulos said in an interview with HousingWire. Mayopoulos told HousingWire he will recuse himself "with respect to matters that I had personal involvement in at Bank of America."
Freddie Mac’s new CEO, former JPMorgan Chase & Co. executive Donald H. Layton, has made similar commitments with respect to his former employer.
Layton receives deferred compensation from JPMorgan Chase, which services more than 1 million mortgages for Freddie Mac and has underwritten billions in company debt.
In order to avoid potential conflicts of interest, Layton "has agreed to recuse himself in specified circumstances from acting upon matters directly relating to JPMorgan Chase that may be considered by Freddie Mac’s board of directors or presented to him in his capacity as Freddie Mac’s chief executive officer," Freddie Mac said in naming him to the post last month.
A graduate of Cornell University and the New York University School of Law, Mayopoulos has also held senior management roles at Deutsche Bank AG, Credit Suisse First Boston, and Donaldson, Lufkin & Jenrette, Inc.
Mayopoulos will take a pay cut, earning an annual salary of $600,000 a year as CEO, although he will be allowed to receive the rest of his $2.66 million compensation package for 2012, the Washington Post reported.
Fannie Mae earned $2.7 billion in profits during the first quarter and said it would not require funding for the Treasury for the first time since the company was placed in conservatorship along with Freddie Mac in 2008.
Although Fannie Mae has paid $22.6 billion to the Treasury through dividend payments, the aggregate liquidation value on the senior preferred stock held by the government remains at $117.1 billion.
At $11.7 billion a year, dividend payments to the government "exceeds our reported annual net income for every year since our inception," the company said.