Mortgage repurchase requests on rise
Banks are facing a wave of requests to repurchase troubled mortgage loans in yet another ripple effect from the housing bust. The pushback from the parties now stuck with the loans - namely Fannie Mae and Freddie Mac - began in earnest in the second half of 2009. With delinquencies and foreclosures still running at record highs, there's no sign the demands will begin to abate anytime soon. Bank of America, Citigroup, JPMorgan Chase, SunTrust Banks and First Horizon are among the institutions that have pointed to increasing requests for added documentation on mortgage loans they've underwritten and since sold or securitized, according to recent regulatory filings and investor presentations. Such requests are precursors to kicking the loans back to the banks if problems are found and it's determined the loans should never have been approved in the first place. While repurchases are typically requested of defaulted or seriously delinquent loans, Fannie and Freddie are scrutinizing loans much more closely these days as they try to shore up their own loan books in the face of outsized losses in the wake of the recession. Not all of the loans being requested for repurchase are nonperforming - some just look iffy - all are single-family residential loans with vast majority of those currently being questioned classified as prime loans, observers say. Last year, banks made $30.87bn in mortgage loan repurchases vs. $7.34bn in 2008, according to trade publication Inside Mortgage Finance. Eighty-four percent of the repurchases came in the second half of the year, according to the Bethesda, Md.-based trade publication.