You better be, when the implications of this one ripple through:

McLean, VA – Freddie Mac (NYSE: FRE) announced today that it will purchase substantially all 120 days or more delinquent mortgage loans from the company's related fixed-rate and adjustable-rate (ARM) mortgage Participation Certificate (PC) securities.

What this means is that all the defaulted loans in these packages that Freddie bought up, bundled up and then puked out into the marketplace are coming home.

To Freddie.

Well, at least initially.

But now, every one of these loan files is going to get the fine-tooth-comb treatment.  And believe me, there's gonna be a lot of lice found in there, along with more than a few cockroaches.

This is going to be a problem folks, because those loans in which reps and warranties (that is, the promises made to Freddie by the banks when they were sold to them) were breached due to a material falsehood of some sort will be, as a matter of fiduciary responsibility, puked back onto the bank involved.

Note that most of the "warehouse" funded brokers and such are already gone.  They went under in 2007 and 2008.  They're done.

But those folks got their warehouse lines from the big banks.  Countrywide (now BAC), Wells, WaMu (now absorbed), Chase, etc.

Now to be sure not all of these bad loans went bad because of some sort of fraud.  Some were made to legitimate borrowers on legitimate terms with everything on the up-and-up - no lies, no schemes, income and assets were as represented, no fraud - but the borrower lost his job and, well, just doesn't have any money.

But I'm willing to bet that a huge percentage of these - likely a majority and perhaps even a supermajority - had some element of fraud in them.

Those, my friends, are headed home, and will land like a millstone around the neck of the bank that tendered them.

Bet on it.

market-ticker.denninger.net/archives/1955-Are-You-SITTING-DOWN-Folks.html

See our other coverage on how Obama left $6.3 Trillion of Toxic Debt Out Of His Budget HERE and

•  “The Federal Government Has Become the Mortgage Market”

January2010_Quarterly_Report_to_Congress_SIGTARP.pdf 

"The role of Federal government in financing housing has grown so dramatically since the outset of the housing crisis that the government now no longer simply supports the mortgage market.  It has taken on so much of the risk involved in financing housing that it has become the market, with the taxpayer shouldering the risk that had once been borne by the private investor.

That’s the view Neil Barofsky, the Special Inspector General for TARP, in his most recent quarterly report to Congress. Click on the link above for a copy."