Banks face elevated reps and warrants costs: KBW
Loan repurchase requests from the nation's housing agencies and the private-label sector remained high in the third quarter, according to a new research report from Keefe, Bruyette & Woods.
The repurchase of Freddie Mac loans on the grounds of reps and warranty violations hit $819 million in the third quarter as total outstanding repurchase requests grew to $2.94 billion at the end of the quarter, up from $2.91 billion in June.
Fannie Mae repurchases reached $2.02 billion in the third quarter as the balance of outstanding repurchase requests hit $16.2 billion, up from $14.6 billion back in June.
KBW analysts say put-back claims should remain elevated throughout next year, but the company still believes GSE put-backs—or requests to buyback Fannie and Freddie loans—peaked this past year.
At JPMorgan Chase ($52.30 1.33%), private-label buyback claims went up, while new put-back demands from the GSEs fell.
New repurchase demands at JPMorgan overall grew to $1.79 billion in the 3Q, up from $1.52 billion, KBW added. Meanwhile, outstanding repurchase demands from the GSEs increased from $3.5 billion to $4.2 billion at JPM.
GSE put-back demands at JPM went down, falling from $1.65 billion to $1.53 billion in the third quarter.
But private label put-back requests grew from $981 million in the second quarter to $1.7 billion in the third quarter at JPMorgan.
At Bank of America, ($13.43 0.07%) its total rep and warranty loss reserves expanded to $16.3 billion during the period, up from $15.9 billion.
New claims at BofA, on the other hand, fell from $8.21 billion in the second quarter to $4.98 billion in 3Q and remained in line with first-quarter levels of $4.7 billion. The second-quarter figure escalated rapidly due to a sharp uptick in private label and GSE claims at BofA, said KBW. Those claims reflected an ongoing dispute between Fannie Mae and Bank of America over putback clams.
"We continue to believe that BAC is in a unique position, so we tend not to extrapolate from their numbers. Total outstanding requests increased to $25.5 billion from $22.7 billion," said KBW.
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