Daniel Mudd, the former chief executive of Fannie Mae, once said that fighting the company's regulators and critics was "like having an argument with your spouse. There's no use in being right. You have to find the way forward."
That kind of thinking — both at the GSEs Fannie and Freddie Mac and at lenders — may lead to more settlements of mortgage put-back claims this year.
"It makes no sense to have everybody fighting about the issues of the past," said Justin Vedder, the senior vice president of risk management services at the insurance brokerage Arthur J. Gallagher & Co.
"There's an operational cost for both the GSEs and the lenders because they all have to hire account executives, repurchase analysts, REO experts and foreclosure people," Vedder said. "The focus now is going to be on disposing and moving forward."
Bank of America Corp.'s separate settlements with Fannie and Freddie, both announced Monday, show the industry's "movement in the right direction," Vedder said.
In his observation, lenders are unable to rebut about one-third of the GSEs' claims. Another third are ultimately fixable if the lender provides documentation, and the rest the parties can never agree on.
In its agreement with Fannie, he noted, BofA settled only "the problem loans where they were wrong" and had no defense. Future lender-GSE settlements, Vedder said, could encompass the other categories (as B of A's agreement with Freddie did).
Vedder said he would not be surprised to see more lender settlements with private-label mortgage bond investors as well.
Lenders will still have a tough time proving that their underwriting did not lead to a default. In many cases, lenders never checked the borrower's income or undisclosed debt or whether the borrower was really living in the home.
"At some point these things have to go to court, and it's difficult to predict the outcome from a legal perspective because there is so little case law," Vedder said.
Buyback claims also should plummet because of the GSEs' loan-quality initiatives, in which problem loans are weeded out on the front end, he said.
"The repurchase remedy is going to proven out this year," Vedder said. "We're seeing the first stages of it in these settlements."