Lenders across the country are facing demands from mortgage investors to buy back faulty loans. Earlier this month, ""Bank of America announced"":http://dsnews.comarticles/bank-of-america-agrees-to-3b-settlement-with-fannie-and-freddie-2011-01-03 that it paid nearly $3 billion to settle repurchase claims from Fannie Mae and Freddie Mac for nearly 800,000 home mortgages with a total unpaid principal balance of more than $130 billion.
[IMAGE]Analysts praised the move for setting a precedent that other banks could follow to reconcile investors' demands for loan buybacks, but some community lenders are already ahead of the game.
""StellarOne Corporation"":http://www.stellarone.com, one of the largest independent, commercial banks headquartered in Virginia, says it has reached an agreement with one of its primary mortgage investors to resolve repurchase and indemnification
[COLUMN_BREAK]claims involving residential mortgage loans sold by the bank's wholesale and retail mortgage divisions prior to 2009.
The agreement provided for a cash payment to the undisclosed bank investor of $1.45 million, which was made on December 28, 2010. StellarOne says a significant portion of this settlement had been previously reserved, and as a result, the company expects its indemnification losses for the fourth quarter to be similar to the level recorded in the third quarter.
The settlement resolved approximately 80 percent of current claims outstanding with all the bank's investors, according to a statement from StellarOne, and it extinguishes all outstanding and potential mortgage repurchase claims related to loans sold to this particular investor prior to January 1, 2009.
""This action mitigates current and future off-balance sheet repurchase and indemnification risk, and is in the best interest of our shareholders,"" said O. R. Barham, Jr., StellarOne's president and CEO. ""The preponderance of our indemnification claims have arisen from pre-2009 mortgage production that was sold to this particular investor through one of our legacy companies.""
StellarOne's banking affiliate operates 56 full-service financial centers and one loan production office, serving the New River Valley, Roanoke Valley, Shenandoah Valley, and Central and North Central Virginia.