Tags: Mortgage | Lenders | Relief | Bad | Debt | Repurchases

Mortgage Lenders Seek Mercy on Bad Debt Repurchases

Friday, 04 Jun 2010 11:36 AM

Mortgage lenders are seeking relief from Fannie Mae and Freddie Mac as the government-supported companies force them to buy back more soured debt.

Loans that have been making payments and defaulted “for a reason that is neither fraud nor related to the underwriting of the loan shouldn’t be subject to a repurchase,” said John Courson, CEO of the Mortgage Bankers Association.

“Lenders are getting repurchase requests on the same loan at multiple times for multiple issues," Courson told told Bloomberg Business Week. He said that situation "shows you they’re going from station one, to station two, to station three” as the companies and their contractors “scrub” loan files looking for errors that weren’t material or never occurred, says Courson.

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Moreover, he said lenders are spending huge amounts defending against requests and documenting how items flagged as errors actually aren’t.

According to a spokesman for Freddie Mac — which had $4.8 billion of repurchase requests pending as of March 31 — repurchases are “triggered when loans are out of compliance with our contractual requirements” or legal ones, or involve fraud.

Last quarter, the companies forced lenders to repurchase $3.1 billion of loans, up 63 percent from a year earlier, after defaults surged to the highest since the Great Depression, according to regulatory filings.

Courson says that his members “certainly understand” their contracts require repurchases of defaulted loans but have begun to “aggressively” push the two companies and their regulator to ease up when faulty appraisals, inflated borrower incomes or missing documentation are discovered.

A key regulator recently said that Fannie Mae and Freddie Mac would not be able to continue to provide funding for the U.S. mortgage market without the continued taxpayer assistance from the Treasury Department, MarketWatch reports.

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Mortgage lenders are seeking relief from Fannie Mae and Freddie Mac as the government-supported companies force them to buy back more soured debt. Loans that have been making payments and defaulted for a reason that is neither fraud nor related to the underwriting of the...
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2010-36-04
Friday, 04 Jun 2010 11:36 AM
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