The fall of Taylor Bean & Whitaker (TBW) has sent ripples through the mortgage lending industry. Even the nation’s second largest mortgage company, Freddie Mac, is feeling the effects. The McLean, Virginia-based government-controlled mortgage financier says it has more than $1 billion in assets tied to the now defunct Taylor Bean.

The GSE said in a Securities and Exchange Commission (SEC) filing last week, “At this time, Freddie Mac is unable to estimate its total potential exposure related to TBW’s bankruptcy; however, the amount of additional losses related to such exposures could be significant.”

When Taylor Bean officially filed for bankruptcy in late August, it was the 12th largest mortgage originator in the United States, and a Freddie Mac servicer.

Taylor Bean has attributed much of its struggle to the failure of Alabama’s Colonial Bank just weeks before its own demise. For years, Colonial was TBW’s primary bank, holding accounts used by the mortgage servicer to deposit borrowers’ payments for remittance to Freddie Mac and other investors. When Colonial went under, those accounts were frozen along with cash flows from homeowners’ loan payments.

Earlier this month, Freddie Mac filed a proof of claim against Colonial totaling $595 million. According to the GSE, the claim relates to payoff funds, borrower payments of mortgage principal and interest, as well as taxes and insurance funds received by TBW on loans owned or guaranteed by Freddie Mac.

In addition to loans TBW serviced, more than five percent of Freddie Mac’s single-family mortgage purchases last year were Taylor Bean loans, according to an earlier SEC regulatory filing. The GSE said last week that it is also owed some $500 million from TBW for loan repurchases. Freddie Mac says the mortgages did not meet its underwriting standards, which warrants a buyback from the selling institution. However, with Taylor Bean in the midst of bankruptcy proceedings, Freddie Mac is unable to pursue a repurchase transaction for the bad loans.