Wednesday, September 15, 2010

Regulator Says Banks Slow to Buy Back Bad Loans

From the Associated Press:

A federal regulator is criticizing banks for failing to take back bad mortgages sold to giant mortgage buyers Fannie Mae and Freddie Mac.

Edward DeMarco, acting director of the Federal Housing Finance Agency, says in testimony prepared for a House subcommittee hearing Thursday that the two government-controlled companies had tried to send more than $11 billion in bad loans back to lenders as of this summer, but have met resistance.

A third of those requests have been outstanding for at least three months. DeMarco said delays by lenders in repurchasing these loans are a "significant concern."

Investors who buy loans from banks have the right to force lenders to repurchase them if they later discover fraudulent statements on loan applications.

Fannie and Freddie buy mortgages and package them into securities with a guarantee against default. They have ensured that millions of Americans can get home loans — even after the housing market collapsed.

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