Freddie Mac, the mortgage-finance company operating under U.S. conservatorship, said its pending requests to lenders for refunds on faulty mortgages rose about 19 percent in the first quarter to $3.2 billion.
The new total included 38 percent that were outstanding for more than four months, the McLean, Virginia-based company said today in a securities filing. The sum represents the unpaid balance on requests to sellers and servicers of single-family home loans, and the increase is measured from the end of 2011. The total decreased from $3.4 billion in the first quarter of last year.
Costs tied to faulty mortgages have cost the nation’s biggest banks more than $72 billion since the start of 2007, according to data compiled by Bloomberg, and lenders say the threat of more “putbacks” is deterring them from making new home loans backed by Freddie Mac and Fannie Mae.
Most banks “are actively exiting the mortgage market and have steep declines in their mortgage portfolio,” Meredith Whitney, head of the self-named advisory firm, said today in a radio interview on “Bloomberg Surveillance” with Tom Keene and Ken Prewitt. “The big issue is, do you want to be in bed with an agency that is going to come back and sue you? No.”
A Federal Reserve survey released this week asked senior loan officers to explain why they were less likely than in 2006 to originate a conventional home loan that meets standards of the so-called government-sponsored enterprises. More than half the respondents “noted the higher risk of putbacks of delinquent mortgages by the GSEs as an important factor, and that factor was listed as the most important one by the largest number of banks,” the Fed reported.
Investors who buy mortgages typically are entitled to ask for refunds or compensation if they later discover that data on home values or the borrower’s income is wrong. Freddie Mac was seized in 2008 by the U.S. to stave off its collapse.
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To contact the editor responsible for this story: David Scheer at firstname.lastname@example.orgA Freddie Mac sign stands outside the headquarters in McLean, Virginia. Photographer: Andrew Harrer/Bloomberg