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Fitch: ‘Volatile’ Buyback Claims Up for Bigger Banks

While some signs suggest the housing recovery may finally be under way, others signal that banks will likely continue to see repurchase claims from ""Fannie Mae"":http://www.fanniemae.com/portal/index.html and ""Freddie Mac"":http://www.freddiemac.com/.


Analysts with ""Fitch Ratings"":http://www.fitchratings.com/web/en/dynamic/fitch-home.jsp found in a report on Monday that repurchase risk remains high for several financial institutions, including Bank of America, JPMorgan Chase, and Ally Financial.

According to Fitch, repurchase risk climbed to 41 percent for Bank of America. Roughly 60 percent of the claims stemmed from private-label requests.


For Citigroup, outstanding claims from the first quarter rose to 12 percent from the previous year.

Wells Fargo saw some improvement. Buyback claims fell 10 percent for the company on a linked-quarter basis. The report held that JPMorgan Chase's outstanding claims still hover at 94 percent.

Fitch analysts wrote that the ratings agency ""continues to believe that repurchase claims represent a moderate pressure to earnings at these financial institutions, and that the GSEs will increasingly focus on smaller originators as they continue to work their way"" through claims from just before the financial crisis.

Analysts nonetheless noted ""a great degree of volatility"" occurring as a result of buyback claims, with Bank of America's repurchases up 40 percent to $395 million over the second quarter this year but down year-over-year, even with $8.6 billion in Countrywide settlement charges.

What will more repurchase risk mean for big banks? As Fannie and Freddie devote more resources to buybacks, according to Fitch, originators will find themselves with more ""burden of proof.""

Do you think Fannie and Freddie will continue going after these banks for bad loans and repurchase claims? Give us your two cents by shooting an email to [email protected]


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