As Treasury Secretary Tim Geithner orchestrated a plan to help the nation's largest banks purge themselves of toxic mortgage assets, Citigroup and Bank of America have been aggressively scooping up those same securities in the secondary market, sources told The Post.

Both Citi and BofA each have received $45 billion in federal rescue cash meant to help prop up the economy and jumpstart the housing market.

But the banks' purchase of so-called AAA-rated mortgage-backed securities, including some that use alt-A and option ARM as collateral, is raising eyebrows among even the most seasoned traders. Alt-A and option ARM loans have widely been seen as the next mortgage type to see increases in defaults.

One Wall Street trader told The Post that what's been most puzzling about the purchases is how aggressive both banks have been in their buying, sometimes paying higher prices than competing bidders are willing to pay.


mortgagemess at 11:31 2009-03-25 said:
This is why the game continues..if you have Jack Smith who has a home with a note of 300K on it but the house is now worth $200K and behind on his note..Jack's loan will now be sold as a bad asset to us the taxpayers..but wait its not over..now..Jack Smith's loan will be bought back at a SEVERE discount to a lender at 20 to 30 cents on the dollar..so yeah Jack..YOU HAVE NO EQUITY..but your new lender does!

And you wonder why the lenders and investors are not INTERESTED in doing loan mods... Permalink

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