This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
See Cramer's multi-million dollar portfolio for FREE and get his new book Get Rich Carefully! Learn More

Bank Stocks Reinfected With Mortgage Putback Worries

NEW YORK (TheStreet) -- Four years on, banks are still seeing increases in mortgage putback demands that are again pressuring shares following the recent Moody's debt downgrade.

A more aggressive stance on mortgage repurchase demands by Fannie Mae (FNMA) and Freddie Mac (FMCC) -- the two government-sponsored mortgage giants, or GSEs, that were taken under government conservatorship in September 2008 -- is prolonging the mortgage mess for several of the nation's largest lenders, which are taking their time about settling the GSE putbacks.

Freddie Mac
Freddie Mac reported that as of March 31, its outstanding mortgage loan repurchase requests -- based on unpaid principal balances (UPB) -- totaled $3.229 billion, increasing from $2.716 billion at the end of 2011. That's a 19% increase over just three months.

Large mortgage lenders have traditionally preferred to sell newly originated mortgage loans conforming to GSE guidelines as quickly as possible, aiming for a quick profit, while retaining servicing, for which they have been paid an ongoing servicing fee by the GSEs. Freddie reported that as of March 31, Wells Fargo Bank N.A. (the main subsidiary of Wells Fargo (WFC)) serviced 26% of the GSE's single-family mortgage loans, while JPMorgan Chase Bank, N.A. (held by JPMorgan Chase (JPM)) serviced 12% and Bank of America N.A. (the main banking subsidiary of Bank of America (BAC)) serviced 11% of the single-family loans.

Freddie said that "as measured by UPB, approximately 38%... of the repurchase requests outstanding at March 31, 2012... were outstanding for four months or more since issuance of the initial request," which includes repurchase requests for which appeals are pending. The servicers often appeal the repurchase requests and see them cancelled once the GSE receives sufficient documentation to determine that the lender, or the seller/servicer, properly underwrote and serviced the loan.

Freddie also said that as of March 31, $155.8 billion, or 9% of its total single-family mortgage loans were covered by agreements with the seller/servicers, releasing the servicers from "certain repurchase obligations in exchange for one-time cash payments." The Federal Housing Finance Agency, which regulates Freddie and Fannie, in September suspended announced it had "certain future repurchase agreements with seller/servicers concerning their repurchase obligations pending the outcome" of Freddie Mac's review of its loan sampling methodology. Freddie entered no further agreements to release servicer's repurchase obligations through the first quarter.

Stock quotes in this article: BAC, C, JPM, WFC, STI 

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
DOW 16,455.45 -46.20 -0.28%
S&P 500 1,874.91 -0.48 -0.03%
NASDAQ 4,130.8520 +3.8850 0.09%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto
Advertising Partners

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs