GSEs Shift Focus for Repurchases: Fitch

""Fitch Ratings"":http://www.fitchratings.com/web/en/dynamic/fitch-home.jsp released a note Thursday stating that Fannie Mae and Freddie Mac won't be slowing down on repurchase requests and focus seems to be shifting from the largest institutions to midtier regional banks.

If this does happen, the rating agency said those banks will start to feel the pressure for claims-related earnings.

Fitch said recent announcements from PNC, Suntrust, and First Horizon expressed an intent to increase reserves against future GSE mortgage repurchase claims, which suggests Fannie and Freddie may be eyeing regional institutions.

The more recent targets for repurchase claims requests have been the five largest mortgage originators - Bank of America, JP Morrgan, Citigroup, Wells Fargo, and Ally Financial. Up until now, Fitch said they have collectively accounted for more than 85 percent of repurchase claims by the GSEs and private label securities (PLS) holders.

For just those five institutions alone, the rating agency said outstanding repurchase claims totaled $24.7 billion as of March 31 of this year, a 20 percent increase from the 2011 first quarter. Out of those five banks, Bank of America represents about 60 percent of the total outstanding claims.

However, Fitch said future GSE claims seem unlikely to impair capital positions materially, so the level of repurchase claims is not expected to have a large impact on U.S. bank ratings.

While regional banks still incur costs related to litigation and repurchase claims for private label MBS issuances, Fitch said it believes those costs should be smaller than similar costs the largest banks face.