Remember back a few months ago when Fannie and Freddie told the banks they had to take back the bad mortgages? Lenders have decided to “just say no”:
Fannie Mae and Freddie Mac are facing growing resistance as they attempt to push failed home loans off their books and onto the balance sheets of banks including Bank of America Corp. and JPMorgan Chase & Co.
The two government-owned mortgage companies are enforcing contracts that require lenders to buy back loans that didn’t meet underwriting standards. At the end of September, the companies reported, banks hadn’t responded to $13 billion in buyback requests. A third of those were at least four months old and Freddie Mac has begun to assess penalties for the delays.
Lenders say they are resisting buybacks because McLean, Virginia-based Freddie Mac and Washington-based Fannie Mae are unfairly second-guessing old appraisals, accusing originators of failing to verify income, or pinning failed loans on minor technical errors. Larger banks say they can handle the potential losses. Some smaller lenders say the strain could sink them.