(Reuters) - Bank of America and Wells Fargo as a money lender, they are facing increasing pressure to buy back bad mortgages sold to investors, marking the bank's housing loans headaches may continue for years.
The bad mortgages that investors such as Fannie Mae (Fannie Mae) and Freddie Mac have been purchased by the bank for many years, but these requirements, intensified in recent months, the bank said in the second quarter of the recent earnings reports.
Provides a beginning and an end to these views from the bank's real estate bubble burst five years ago, still fresh and remind. The new fees and the threat of litigation is to inhibit the bank's share price, the problem may stay for some time, analysts and experts said.
The FBR Capital Markets analyst Paul Miller said: "This is not yet complete," we will continue to surprise in the industry. "
Bank of America, of its total investments outstanding claims Wednesday in the second quarter increased by 40% to approximately U.S. $ 220 billion, may be considered to be the most pain. The bank's shares fell nearly 5 percent, as investors worried about future losses, last Thursday fell again.
When low interest rates, Bank of America is a lot of new loans, the borrower purchase and refinancing old loans cost about anxiety to cover up this success.
Prosperity in the real estate market in the past decade, banks divide up into a highly structured residential mortgage-backed securities and then sold to investors of billions of dollars in loans. The buyers of these loans, including the now government-controlled institutions (Fannie Mae), Fannie Mae and Freddie Mac, as well as private investors.
When the sale of mortgage loans, the banks to make commitments or loans "representations and warranties. Investors can require banks to buy back the deterioration of the mortgage, if these commitments, such as poor underwriting, lack of income verification or other documents the wrong reasons, obviously break.
Bank to fight some of these claims, but most lenders still expect the mortgage to buy back many.
The second-largest U.S. bank, Bank of America, facing the greatest threat from the repurchase request, bought the subprime lender Countrywide Financial in 2008, mainly in the housing market boom produced by toxic loans. The mortgage sector has been released since early 2010, the loss of more than $ 3 billion yuan.
The bank claims about half of Fannie Mae (Fannie Mae) and Freddie Mac, were placed in 2008 in their loan losses surge in government conservatorship.
Tensions, Bank of America and Fannie Mae bank in February to stop selling a number of lending institutions. Declaration pursuant to the Securities, as of March 31, Bank of America and Federal best repurchase request - $ $ 710 million, or 58% of the outstanding claims.
Banks, their profitability, said Fannie Mae (Fannie Mae) repurchase standards have changed, different banks, the interpretation of the contract. For example, banks have noticed the increase in the loan the borrower to pay the claim at least two years.
Bank of America believes that when the borrower has to pay two or more years, this is a hard failure, rather than the bank's underwriting, such as economic conditions.
Fannie Mae (Fannie Mae) and Freddie Mac said they are looking for American taxpayers in their claims. Federation, for example, if the collection is less than expected, Bank of America, it may need more capital from U.S. Treasury bonds.
"According to our contract, the lender must repurchase the Fannie Mae loan, but do not meet our standards, Fannie Mae spokesman, Andrew Wilson said." "Our pursuit of repurchase in order to minimize losses and protect taxpayers interests. "
Freddie Mac does not think taxpayers should pay substandard loans sold to the agency spokesman Michael Cosgrove said. The top three for Freddie Mac, because the bank claims do not meet the underwriting standards and collateral or identification of the lending bank and the borrower's income, he said. Freddie Mac did not disclose the banks claim.
Increase reserves
Banks, including Wells Fargo and PNC Financial Services Group said that they expected to pay investors more than they previously thought they allocate additional funds to cover the request. Fifth third Bancorp said on Thursday it expected claims to increase later this year.
Wells Fargo, the largest U.S. mortgage allocated $ 669 million, to cover the repurchase, when the second-quarter earnings from $ 242 million a year ago, announced last week.
Wells Chief Financial Officer Tim Sloan said: "We want to make sure we have the reserves, absolutely appropriate accumulated in a conference call with analysts. "We see the agency continue to adjust their demands."
The police reserves increased by $ 438 million, up from $ 21 billion dollars a year ago.
Swimming against the tide of JPMorgan Chase & Co., said claims have reached a "turning point", and is declining.
In addition to the jump room from the request of Fannie Mae (Fannie Mae) and Freddie Mac, Bank of America said it was working to get more from private investors to comply with the requirements of the regulations restricting claims. These claimants do not have a value of $ 85 billion of the settlement banks and major institutional investors as part of last year.
The second quarter, Bank of America increased by $ 395 million repurchase reserves, this is the first quarter, but the way from $ 14 billion set aside a year ago to pay $ 850 million dollar settlement and repurchase request .
The bank currently has about $ 1.6 billion reserve to cover these claims, but FBR Capital Markets analyst Paul Miller wrote in a research report on Wednesday, the banks may not be sufficient reserve to cover its future losses . He said that World Bank officials later said he argued that they have sufficient reserves.
Miller said that the bank gave him a very strong argument, but he did change his mind. "I have my opinion. They have their opinions," he said.
Bank spokesman said Jerry Dubrowksi, the bank's calculations take into account the fact that half of the mortgage of $ 2.2 billion pending against the U.S. dollar indemnity backup. In addition, the Bank has always been with the settlements in the balance of private investors to pay 8 cents to $ 12, he said.
Last Wednesday the bank said it is impossible to "reasonable" may result in the loss estimated Freddie Mac and Fannie. It does not change the loss of private investors may be $ 500 million more than the estimate of the existing reserves.
"We have an important reserve to meet potential representations and warranties claims, Dubrowski said."
The whole industry, the repurchase request may be near the peak period, but there are likely to remain a concern for at least a year or two years at the University of Maryland School of Business Teaching Fellow, former bank president Clive Rossi said.
"We are certainly not through it," he said. "This is another thing to investors' uncertainty."



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