No doubt you may have heard Freddie Mac and Fannie Mae are requiring the banks to repurchase $9.8 billion on bad mortgages. Some folks think that number will rise to $20 – $30 billion before the wave is over.
Read about it in the New York Times here: http://www.nytimes.com/2010/08/20/business/20norris.html?_r=1&ref=high_and_low_finance
Wells Fargo recently repurchased $530 million of mortgage loans. It concluded, according to the NY Times, “…that those loans were worth, on average, a little less than half their face value.”
Think about it. Bad news, like trouble, runs down hill. Is anyone naïve enough to think that banks will go down this path alone? Chances are that if Freddie Mac and Fannie Mae are demanding that banks eat bad loans, they may also decide to demand that the brokers and agents who delivered these “deals” also cough up!
Freddie, in its quarterly report filed this month, said it was now requiring banks “to commit to plans for completing repurchases, with financial consequences or with stated remedies for noncompliance, as part of the annual renewals of our contracts with them.”
Might be time to consult a lawyer, check your insurance, and make sure that if you are a broker or agent, you are protected if the government makes this kind of demand on you.
What do you think? We’d like to hear your opinion.