Accountants at Fannie Mae and Freddie Mac are auditing mortgage files to uncover loans with improper documentation about a borrower’s income, and then forcing banks and savings and loans to buy the loans back.
Freddie required lenders to buy back $2.7 billion of loans in the first nine months of 2009. Fannie Mae won’t disclose its figures, but the mortgage trade publication Inside Mortgage Finance said Fannie made $4.3 billion in loan-repurchase requests in the first nine months of 2009.
One result is that banks are underwriting mortgage loans even more carefully than they were last year, which can further slow the lending process.
“If you’re being hit with a lot of repurchases very suddenly, the easiest thing to do is to tighten your standards rapidly,” said Glenn Boyd, a Barclays analyst.
Source: The Wall Street Journal, Nick Timiraos (01/30/2010)
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