Crisis Leftovers: Fannie, Freddie Force More Mortgage Buybacks

Foreclosure MediationFannie Mae and Freddie Mac are forcing the nation’s biggest lenders to buy back more of the badly-written mortgages that served as a trigger for the financial crisis, and a dash for cash has ensued.
The government-controlled mortgage finance giants Fannie and Freddie could force some of the top lenders – including Bank of America, JPMorgan Chase, Wells Fargo and Citigroup – to buy back $21 billion of home loans this year as part of its housecleaning of souring mortgages.
That widely-distributed estimate comes from Oppenheimer & Co. analyst Chris Kotowski, who projects U.S. banks could be hit with losses of $7 billion this year when those loans are taken back.
When banks are forced to buy back bad loans, they typically take a loss. This means higher reserves for credit losses and reduced revenues.
And it means that the financial crisis is still gnawing at their books, despite the countless bailout programs set up by the U.S. Treasury, mostly replenished by the banks’ repayments.
The cycle of mortgage buybacks is being accelerated as Fannie and Freddie, now financing more than 70 percent of mortgages, are making the lenders more accountable for their past underwriting mistakes.
Fannie and Freddie have already sought nearly $127 billion in Treasury bailouts, and since a controversial Christmas Eve announcement by the Treasury, now hold open-ended credit lines to cover quarterly shortfalls.
Fannie and Freddie forced the four largest U.S. banks with buybacks in 2009 amounting to about $5 billion in losses, according to recent company filings.

2 thoughts on “Crisis Leftovers: Fannie, Freddie Force More Mortgage Buybacks

  • March 7, 2010 at 4:21 pm

    After Countrywide modified our loan reducing the rate to 4% December 2008 with payments to begin March 2009, we were relieved that we would be able to handle the next 5 years of mortgage payments. We made payments on time. May 2009, we began to receive our mortgage statement from Bank of America as the new service provider.
    June 12, 2009, we received notice our loan would be transferred to Residential Credit Solutions (RCS). After making payments for 6 months on time at the new rate, RCS returned our payment on 8/10/2009 and shortly after sent a “Notice Of Intent To Take Legal Action” dated 8/24/2009.
    We sought legal help from US Loan Auditors, but they were not taking quick enough action to stop the foreclosure process and we therefore terminated their service. In an effort to save our home, we are now attempting to work through RCS for another loan modification, as we feel we have no other alternative.
    We were never late, our payments were at the agreed upon rate, yet the Countrywide agreement was ignored. Now our credit is ruined, and our house is still foreclosing! I feel that I have been taken advantage of by RCS that the original contract of 4% was ignored and my credit ruined falsely.

  • March 7, 2010 at 11:10 pm

    My Comment is that this is the biggest scam ever. The goverment should do something about this terrible situation that is happening to humanity. People are being thrown in the street, running in different direction trying to move here and there because the banks want to have their way. Not only people are loosing their homes,but the animals as well. They’re also loosing their lives because of all this. This planet is being destroy because of all the nonsense and selfishness. No love, No respect for life.

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