On the tape (Bloomberg):
Fannie Mae and Freddie Mac may force lenders including Bank of America Corp., JPMorgan Chase & Co., Wells Fargo & Co. and Citigroup Inc. to buy back $21 billion of home loans this year as part of a crackdown on faulty mortgages.
U.S. banks could suffer losses of $7 billion this year when those loans are returned and get marked down to their true value, according to estimates by Oppenheimer & Co. analyst Chris Kotowski. Fannie Mae and Freddie Mac, both controlled by the U.S. government, stuck the four biggest U.S. banks with losses of about $5 billion on buybacks in 2009, according to company filings made in the past two weeks.
A less deep hole? Start with $21B and dial it back for the pushback from banks and what do you get? A drop of water in a bottomless bucket. Again I ask, who will buy this stuff when the Fed backs out? Further, how much are we willing to dump into these agencies as there is no end to losses in sight?The surge shows lenders are still paying the price for lax standards three years after mortgage markets collapsed under record defaults. Fannie Mae and Freddie Mac are looking for more faulty loans to return after suffering $202 billion of losses since 2007, and banks may have to go along, since the two U.S.-owned firms now buy at least 70 percent of new mortgages.
Pondering the imponderable.
Disclosure: no position