Tag Archives: Loan Repurchases

Wells Fargo and JPMorgan Chase are the first of the big banks to release their earnings summaries for the third quarter. The two reports paint a very mixed picture. Wells Fargo raked in record profits during the July-to-September period, while JPMorgan Chase reported its first-ever loss under CEO Jamie Dimon's watch as a result of a hefty one-time legal expense, which included reserves for litigation and regulatory proceedings.

SunTrust Banks, Inc., is ponying up millions to resolve mortgage-related legal matters, including claims pertaining to the National Mortgage Settlement, and to settle mortgage repurchase demands from Fannie and Freddie. SunTrust says its third-quarter numbers will be negatively impacted by these resolution actions, resulting in an after-tax earnings reduction of $179 million.

Two more companies are in the clear with Freddie Mac following agreements on claims related to loans that went south after they were sold to the GSE. Wells Fargo has agreed to pay a total of $869 million to settle repurchase claims from Freddie Mac. The agreement covers approximately 6.7 million loans. Suntrust will pay the GSE a total of $65 million, covering approximately 312,000 mortgages.

Freddie Mac is ramping up repurchase demands and increasing the pool of defaulted loans subject to put-backs to include mortgages originated prior to the crisis in 2004 and 2005, according to U.S. Bancorp CEO Richard Davis. Speaking to investors at the Goldman Sachs Financial Services Conference this week, Davis described the news as ""unexpected,"" but Freddie Mac maintains it has always had the authority to pull files for review when loans stop performing regardless of when the loans were originated. The GSE says its repurchase policies have not changed and it is committed to working with lenders to resolve any issues.

Despite a number of potentially damaging headwinds, the ongoing housing recovery will remain sustainable for the foreseeable future, analysts for Capital Economics say in a recently released report. The housing industry's rapid rebound took many experts by surprise--even the researchers who authored the report admit they ""have been slightly taken aback"" by the recovery's speed. However, they point to several major indicators that show the current upturn is more than a temporary blip or a false recovery.

Freddie Mac's single-family seriously delinquent rate decreased from 3.37 percent in September to 3.31 percent in October--the lowest it's been since August 2009. The GSE's multifamily delinquency rate also fell, from 0.27 percent in September to 0.24 percent for the month of October. At the same time, Freddie Mac's total mortgage portfolio continued to shrink, however increased purchase and issuance volume pushed the company closer to positive growth for the first time in more than a year and a half.

An analysis released by Keefe, Bruyette & Woods(KBW) found representation and warranty costs for loan repurchases remained elevated in Q3. According to KBW, current losses can mostly be attributed to loans sold to the GSEs. Fannie Mae repurchases totaled $2.02 billion in Q3, and its balance of outstanding repurchase requests increased to $16.2 billion. Meanwhile, Freddie Mac repurchases totaled $819 million, and its outstanding requests ticked up to $2.94 billion.

Pointing to slow employment growth and an ""elevated"" unemployment rate, the Federal Open Market Committee said Wednesday the Federal Reserve ""will continue purchasing additional agency mortgage-backed securities at a pace of $40 billion per month."" At the same time, the FOMC said it would maintain the target federal funds rate at 0 to 1/4 percent and said the ""exceptionally low levels for the federal funds rate are likely to be warranted at least through mid-2015.""

On the heels of the Federal Housing Finance Agency's announcement of its revised representation and warranty guidelines, comes news that Freddie Mac will be increasing its repurchase claims in the near future. The revised rep and warranty guidelines were designed to provide more clarity in the market, but in the meantime, the FHFA Office of Inspector General reports Freddie Mac will increase repurchase requests to between $0.

SunTrust is taking steps to improve its position in the market. The bank has continued to grow its mortgage banking division, which earned $258 million last quarter, according to FBR Capital Markets.