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Author: crackdclaw Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 127777  
Subject: You are kidding - 8 years ago? Date: 12/6/2012 11:16 AM
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Hey Dave, or anyone with industry knowledge:

You probably saw the news release that Freddie is stepping up mortgage repurchase demands. According to U.S. Bancorp, Freddie is expanding buybacks requests to mortgages originated in 2004 and 2005. My question, if a 2004 loan performed until the economic collapse in 2008, and then became non-performing leading to foreclosure, could U.S. Bankcorp really be required to buyback, because the original loan did not meet Freddie's 2004 lending standards?

Basically, how can Freddie consider a loan that was consistently paid on time for four years, then as a result of nationwide economic difficulties begin to not perform, be the result of U.S. Bankcorps underwriting ability?
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Author: Dwdonhoff Big gold star, 5000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124453 of 127777
Subject: Re: You are kidding - 8 years ago? Date: 12/6/2012 12:25 PM
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Hi crackd,

My question, if a 2004 loan performed until the economic collapse in 2008, and then became non-performing leading to foreclosure, could U.S. Bankcorp really be required to buyback, because the original loan did not meet Freddie's 2004 lending standards?
You bet... or, more accurately, Freddie/Fannie/HUD can use their bottomless legal budget to bludgeon a lender to buy back any loans said agencies decide they want to huck back, regardless the reason. The lenders are forced to consider the costs of buyback, versus legal costs to resist. The agencies don't generally huck back single loans at a time, they'll slap a tape full of hundreds or thousands of loans for buyback. Sometimes the lenders fight the most obvious abuse... but we're in ideological times where to be in commerce is to be guilty, by default.

Basically, how can Freddie consider a loan that was consistently paid on time for four years, then as a result of nationwide economic difficulties begin to not perform, be the result of U.S. Bankcorps underwriting ability?
A) You must be assuming the representations & warranties agreements (reps & warrants) were clear, cut & dried, with clear, brightline language in the first place,
B) You must be assuming the gorrilla with the legal fee printing press gives a damn about the language or intent of any prior contractual commitments.

This isn't about economics, law or logic, this is about revenge, blame & punishment.

Dave Donhoff
Leverage Planner

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Author: crackdclaw Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124454 of 127777
Subject: Re: You are kidding - 8 years ago? Date: 12/6/2012 12:43 PM
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You must be assuming the gorrilla with the legal fee printing press gives a damn about the language or intent of any prior contractual commitments.

Thanks for your view, Dave. You need deep pockets to be in the home mortgage business. Not to fund loans, but to keep on top of regulatory issues. I don't see anyone new entering the mortgage origination business. Warren Buffet looks for companies that have a moat around their product / service. I see he continues to buy WFC and now owns 10% of the company. This is the company that currently provides about a third of all home loans.

This isn't about economics, law or logic, this is about revenge, blame & punishment.

Still more shoes to drop. FHA again looking to raise monthly MIP premiums and will need some type of govt bailout in Q1 2013. Most lenders underwriting standards were stricter than what FHA itself wanted to see. Lenders have overlays on top of the FHA guidelines, yet somehow there will be fingers pointed at the banks for providing FHA loans to borrowers who eventually defaulted.

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