Mortgage lenders plagued with requests from Fannie Mae to buy back defective loans can now take comfort in the knowledge that they're far from alone.
Fannie said Monday in its first-quarter securities filing that it made servicers buy back or reimburse it for losses on $1.8 billion of loans, 64% more than a year earlier. It was the first time the government-sponsored enterprise disclosed the volume of its repurchase demands; previously Fannie only acknowledged that such demands had been on the rise since 2008 as delinquencies worsened.
Freddie Mac also has been sending more loans back to lenders: $1.3 billion in the first quarter, up 65% from a year earlier, according to its first-quarter filing last week.
In February Fannie announced a "loan-quality initiative" designed to reduce loan repurchase requests. If lenders do a better job on the front end of making sure the loans they deliver meet the GSE's guidelines, Fannie has said, it would not have to make lenders buy back so many defective mortgages after the fact.
The initiative will begin next month. Among other changes, lenders will have to pull a second credit report just before a loan closes to check if the borrower has taken on additional debts since submitting the mortgage application.
But Fannie in its Monday filing described the initiative as a "longer term strategy" that will take time to bear fruit. The GSE reiterated that it expects repurchases to remain high for the rest of this year.
Fannie also said Monday it had asked the Treasury Department for another $8.4 billion of government funding after losing $13 billion in the first quarter. With the housing market and economy still weak, loan losses remained high during the period, the GSE said.
Unlike Freddie, which said last week that a new accounting rule was the primary reason its first-quarter net worth was negative, Fannie said the new standard actually increased its net worth by $3.3 billion.
But after its eleventh straight quarterly loss, the larger GSE's net worth remained in the red, at negative $8.4 billion, creating the need for an additional infusion on top of the $75 billion Fannie has already received from the government.