Fannie Mae continues to ratchet up its requests for seller/servicers to repurchase delinquent loans, while its smaller rival Freddie Mac has actually reduced its buyback claims over the past four quarters.
In its second-quarter financial report, Fannie said its outstanding repurchase requests totaled $9.6 billion at June 30, up $1 billion from the end of the first quarter.
The increase came even though its seller/servicers satisfied Fannie's request to repurchase loans with an unpaid principal balance (UPB) of $3.3 billion. At the end of the first quarter those requests totaled $1.2 billion.
The GSEs typically do not disclose the actual amount paid by the lenders on these UPBs. The requests are based on loan losses after foreclosure sales. Fannie noted in its quarterly securities filing that it is receiving "higher amounts" from lenders on loan repurchase requests.
This is not necessarily good news for certain megabanks such as Bank of America, which is trying to reduce it buyback exposure.
BofA — thanks to its purchase of Countrywide Financial Corp. (CFC) three years ago — is Fannie's largest servicer. Loans funded by CFC during the housing boom have not only hammered BofA's earnings, but hurt Fannie, which bought billions from CFC in the secondary market.
To date, the megabank has set aside $18 billion in reserves to cover repurchase requests based on breaches of representations and warranties.
BofA services 25% of Fannie's $2.8 trillion guaranteed loan portfolio, which has a 4.08% serious delinquency rate (90 days or more past due).
Meanwhile, Freddie reported $3.1 billion of outstanding buyback requests at June 30, compared to $3.4 billion in the first quarter.
The GSE said it recovered losses on $1.2 billion (UPB) during the second quarter—flat compared to the first quarter.
BofA services 11% of Freddie's loans and is the GSE's third largest servicer. Although CFC was not a big client of Freddie's, BofA — pre-CFC — had a “strategic alliance” deal with the GSE.
Under a strategic alliance agreement, a seller/servicer sells a large portion of its originations to a GSE in exchange for a discount on its guarantee fee. Under then-CEO Angelo Mozilo, CFC had an alliance agreement with Fannie. Reportedly, its g-fee (at times) was as low as 12 basis points.
At June 30, Freddie had a serious delinquency rate of 3.5% on its $1.8 trillion guaranteed single-family portfolio.
Both GSEs reported operating losses for the second quarter even before paying dividends on the billions of dollars they've borrowed from the U.S. Treasury.
Fannie reported a $2.9 billion pre-dividend loss, after dropping $6.5 billion in the first quarter. Including the preferred dividends, the GSE lost $5.2 billion.
Freddie Mac posted a $2.1 billion loss in the second quarter after booking large credit and derivatives charges. The GSE ended the quarter with a net worth deficit of $1.5 billon, but only after paying Treasury a quarterly dividend of $1.6 billion.
To date, Freddie has received roughly $66.2 billion of assistance from taxpayers, far less than Fannie Mae which has received $103 billion.