Tag Archives: Loan Repurchases

The Securities and Exchange Commission (SEC) is putting mortgage lenders on alert regarding disclosures about potential losses from foreclosure paperwork defects and loans they may be forced to buy back from investors. In a letter sent to the chief financial officers of publicly traded banking companies, the federal agency reminded lenders that they are obligated to relay to their investors any known trends, commitments or uncertainties that they expect could have an ""unfavorable impact"" on the company's financial results.

Taxpayers' bill for keeping the nation's two largest mortgage firms afloat could more than double between now and 2013, according to the companies' regulator. To date, Fannie and Freddie have drawn $148 billion from the Treasury since they were placed under government control in September 2008. The two GSEs' could need another $73 billion to $215 billion to maintain positive net worth over the next three years. In a worst-case scenario, the overall tab for keeping Fannie and Freddie in business will reach $363 billion.

Bank of America said Tuesday that it lost $7.3 billion during the three-month period ending in September. The company attributed the deficit to new financial reform regulations related to credit and debit card payments. On the mortgage side of its business, though, the company is seeing improvements. Mortgage banking income jumped 95 percent last quarter, the ratio of nonperforming loans and assets declined, and no sizeable losses are expected from the company's foreclosure suspension and affidavit problems.

Ambac Financial Group, Inc. opened a lawsuit against Bank of America Corp. over improperly underwritten loans the company says the bank's Countrywide unit used to induce it into purchasing mortgage-backed securities. After reviewing 6,533 of the 268,000 loans it insured for Countrywide, Ambac found that 97 percent of the reviewed loans didn't follow the underwriting guidelines Countrywide said it used to assemble loans.

Fannie Mae has enhanced its EarlyCheck technology service to help lenders identify eligibility or data issues with loans they plan on selling to the GSE in order to minimize the risk of repurchases. With EarlyCheck, lenders now have access to Fannie Mae delivery data checks at any point in the business process, allowing them to spot and correct potential underwriting errors earlier in the process - from prior to closing through to the pre-delivery stage.

The Work Number, an employment and income verification service of Equifax, recently launched a new product, Point In Time, which, according to the company, is a response to market demands for loan-level documentation to investigate repurchases and mortgage insurance rescissions. Designed to provide retro income verification services to validate and document a borrower's employment and income for loan funding, Point In Time was created to help lenders, insurers, and investors automate and streamline the quality assurance process.

Banks that sold bad mortgages to Fannie Mae and Freddie Mac have a contractual obligation to buy the loans back, according to their regulator. But many of the nation's largest institutions aren't living up to their end of that commitment. The director of the Federal Housing Finance Agency says that as of the end of the second quarter, Fannie Mae had $4.7 billion in outstanding repurchase requests, and Freddie Mac had $6.4 billion -- more than a third of which have been outstanding for more than 90 days.