One-third of Fannie, Freddie mortgage repurchase requests 120 days or older
Fannie Mae and Freddie Mac have made $13.3 billion in mortgage repurchase requests to major U.S. banks as of Sept. 30. Of those, 34.2% are outstanding for 120 days or more, according to company filings with the Securities and Exchange Commission. The government-sponsored enterprises are submitting repurchase requests to lenders for mortgages that have defaulted and were not written to fit GSE guidelines. Bloomberg reported Monday that major banks such as Bank of America (BAC) and JPMorgan Chase (JPM) are resisting these requests. In their third quarter financial supplements to the SEC, Fannie Mae reported $7.7 billion in repurchase requests, while Freddie Mac reported $5.6 billion. But further down in the 10-Q, each company listed how much of those requests still await action by the lender. For Fannie Mae, 36% of its requests, or $2.7 billion worth, have been pending for 120 days or more. For Freddie, the percentage is 32%, or $1.7 billion worth of repurchase requests sitting on the shelf for at least four months, up from 23% at the end of 2009. According to Fannie, the amount is based on the unpaid principal balance of the loans underlying the repurchase request, not the actual amount requested from the lenders. FBR Capital Markets estimates that the banks may face between $54 billion and $106 billion in costs from these repurchases. JPMorgan analysts said mortgage buybacks may cost lenders as much as $120 billion. Fitch Ratings said the number could reach as high as $180 billion for the big-four banks. "We continue to work with our mortgage seller/servicers to fulfill these outstanding repurchase requests; however, as the volume of repurchase requests increases, the risk increases that affected seller/servicers will not be willing or able to meet the terms of their repurchase obligations and we may be unable to recover on all outstanding loan repurchase obligations resulting from seller/servicers’ breaches of contractual obligations," according to Fannie Mae. While Fannie does allow the redelivery of a mortgage that was repurchased by a lender so long as the bank corrected the loan to fit Fannie's underwriting standards, it released guidance Monday saying it would not accept a redelivery from secondary investors or another GSE. Write to Jon Prior.