Citi’s Loan Repurchase Reserves Jump

Amongthe wealth of information Citigroup (C Quote) offered up in its annual Form 10-K late last week was an acknowledgment its reserves to repurchase loans increased more than six-fold in 2009 compared to the year before. The company’s loan repurchases have primarily come from the government-sponsored enterprises, such as Fannie Mae(FNM Quote) and Freddie Mac(FRE Quote). The loan documentation package requests, increased level of outstanding claims and increased loss severity estimates because of macroeconomic factors last year “contributed to a $493 million change in [Citigroup’s] estimate for the [repurchase] reserve in 2009,” the company said. Citigroup’s loan repurchase reserve balance at the end of the fourth quarter stood at $482 million vs. $75 million at the beginning of the year, according to the filing. [Read the full article]

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If you read the news everyday, you’ve probably seen more and more headlines like these in recent months: “Government Shuts Down Troubled Mortgage Firm” and “HUD Probes High-Default Lenders.” Such language might lead you to believe that the feds are weeding out bum lenders. What you’d be missing is that even after the feds zero in on suspect mortgage outfits, there’s still a good chance they will continue to put taxpayer dollars in jeopardy for years to come. For a Top 10 list of Uncle Sam’s biggest deadbeat lenders, click here. First, a bit of background. The federal government has for decades guaranteed mortgages for low-income home buyers who would have a hard time securing a loan without help. In return for a premium of 1.75% of the loan amount, and proof of a 3.5% down payment, the government will back new mortgages through the U.S. Department of Housing and Urban Development’s (HUD) insurance agency, which is known as the Federal Housing Administration. [Read the full article]

Good news for struggling homeowners: On Monday, the federal government said it is extending the Home Affordable Refinance Program (HARP) to June 2011. It was set to expire on June 10. The refinance program, which is administered by Fannie Mae and Freddie Mac, is a key component of the Obama administration’s Making Home Affordable Program. “FHFA has reviewed the current market situation and the state of mortgage insurance availability and has determined that the market conditions that necessitated the actions taken last year have not materially changed,” said Ed DeMarco, acting director of the Federal Housing Finance Agency, in a news release. In 2009, Fannie Mae and Freddie Mac purchased or guaranteed more than 4 million refinanced mortgages. Of those, 190,180 were HARP refinances with loan-to-value ratios between 80 percent and 125 percent. The HARP began in April 2009. [Read the full article]

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