Mortgage putback threat reduced for lenders under new U.S. rules

‘More Audits’

“What you’re going to see is a surge in more audits, rather than less, just as companies are getting comfortable that the worst is behind them,” Rood said in a telephone interview yesterday.

In the wake of the housing bubble, Fannie Mae and Freddie Mac have been reviewing files on defaulted loans originated between 2005 and 2009 for signs that the underwriting was faulty. In the first two quarters of this year, the so-called government-sponsored enterprises asked banks to buy back mortgages with an unpaid principal balance of $18.9 billion.

Banks usually end up paying about half of the unpaid principal balance when a putback demand is successful, according to the companies.

Fannie Mae and Freddie Mac will continue to work with lenders to resolve claims related to loans originated primarily before September 2008, the agency said in today’s statement.

Washington-based Fannie Mae and McLean, Virginia-based Freddie Mac were seized by the federal government in September 2008 after investments in risky mortgages pushed them to the brink of bankruptcy. They’ve received about $190 billion in aid since then, and the battle with banks over repurchases is part of their efforts to minimize losses.

Buy-Back Costs

Bank of America Corp., Wells Fargo & Co., JPMorgan Chase & Co., Citigroup Inc. and Ally Financial Inc., set aside almost $3 billion to buy back bad home loans in the first half of 2012, according to data compiled by Bloomberg. Regional lenders including Atlanta-based SunTrust Banks Inc. said they set aside at least $1.3 billion for such loan repurchases in the same period, exceeding their total for all of 2011.

In his speech at the American Mortgage Conference, DeMarco outlined future steps FHFA will take to shrink Fannie Mae and Freddie Mac’s footprint in the mortgage market.

The fees the enterprises charge to lenders to guarantee loans, which will have increased by 20 basis points by the end of the year, will continue to be raised, he said.

FHFA will also seek public input in October on a plan for creating a single platform for packaging loans into securities, he said. Currently, each company has its own platform.

The refinancing program for borrowers who owe more than their homes are worth will be updated by the FHFA, DeMarco said. “As we continue to gain insight from the program, we will make additional operational adjustments,” he said.

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