Banks balk at Fannie and Freddie's demands
11/30/2010
By Credit.com Staff
The nation's two mortgage backing giants say contracts on billions of dollars worth of loans state the originators can be forced to buy back mortgages that lapse into default if a review found that they didn't meet minimum underwriting standards, according to a report from Bloomberg. However, the lenders say these mortgages are being subjected to unfair second-guessing.
Through the end of September, the two companies had $13 billion in old buyback requests that banks hadn't responded to, and Freddie Mac began assessing penalties over the delays, the report said. But while larger banks say they can handle the losses these buybacks would create, smaller lenders claim they would be ruinous.
Meanwhile, lenders are still contending with fallout from the robo-signing crisis that saw many banks engage in the approval of thousands of foreclosures they didn't have time to properly examine.
