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Bank Stocks Reinfected With Mortgage Putback Worries

since the "GSEs continue to pursue claims aggressively," FBR analyst Paul Miller on Friday raised his "estimate for industrywide losses for GSE and private-label reps and warrants claims to $130 billion from $110 billion" with detailed loss exposure estimates for four major servicers.

Miller said that Bank of America "is currently not paying claims from the GSEs per our sources," with the dispute centering on "whether the agencies can push back loans if the borrower remained current for two-plus years" before defaulting. While FBR believes "Bank of America has a strong argument that defaults after the initial 24-month period are generally more economically driven than affected by underwriting standards," Miller raised his total mortgage putback loss estimate from the company to $53.267 billion from $42 billion, adding that Bank of America "still has exposure to a number of private-label putbacks, including a pending $8.5 billion settlement for a portion of these loans."

The analyst estimates that Bank of America has already realized $31.704 billion in mortgage putback losses.

Miller estimates that JPMorgan Chase faces total mortgage repurchase loss exposure of $16.604 billion, having already realized $9.901 billion in losses.

For Wells Fargo, Miller estimates total mortgage putback exposure of $$8.485 billion, with $3.436 billion in losses already realized.

The analyst estimates that Citigroup is looking at potential mortgage repurchase exposure of $5.669 billion, having realized $4.235 billion in losses to date.

For SunTrust, Miller estimates total putback exposure of $3.995 billion, with $2.421 billion having already been realized.

Miller said that "ultimately, repurchase losses from private [residential mortgage backed securities] should be manageable, but recent suits could pose a negative headwind for the industry."

-- Written by Philip van Doorn in Jupiter, Fla.

>Contact by Email.

Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.
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