Fannie Mae sells $3.0 bln bills at mixed rates


Wed Aug 29, 2012 7:25pm IST

Aug 29 (Reuters) – Fannie Mae, the largest U.S.
home funding source, said on Wednesday it sold $3 billion of
benchmark bills at mixed interest rates compared with last
week’s sale of similar maturities.

Fannie Mae said it sold $1.5 billion of three-month bills due
Nov. 28, 2012 at a 0.122 percent stop-out rate, or lowest
accepted rate, up from the 0.121 percent rate for last week’s
sale of $1.5 billion of three-month bills.

The company also sold $1.5 billion of six-month bills due
Feb. 27, 2013 at a 0.155 percent rate, down from the 0.160
percent rate for its $1.5 billion of six-month bills sold Aug
22.

The three-month bills were priced at 99.969 with a money
market yield of 0.122 percent. The six-month bills were priced
at 99.922 with a money market yield of 0.155 percent.

Settlement is Aug. 29-30.

Calendar of major business events scheduled for Thursday

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Stocks edge up after government revises second-quarter growth higher

The National Association of Realtors said its index of sales for previously owned homes increased 2.4 percent in July, reaching its highest level since April 2010, the last month buyers could qualify for a federal tax credit.

“It’s a mixed message overall,” said JJ Kinahan, chief derivatives strategist at TD Ameritrade. “We all know we need 2 percent (economic) growth. And you can’t continue to improve on housing if the unemployment picture doesn’t improve. At some point, the numbers have to match.”

The Dow added 4.49 points to close at 13,107.48.

The Standard Poor’s 500 index added 1.19 points to 1,410.49, while the Nasdaq composite index gained 4.05 points to 3,081.19.

Crude oil lost 84 cents to finish at $95.49. Hurricane Isaac made landfall Tuesday night, but its heavy winds and rain aren’t expected to cause extensive damage to oil production and refinery operations in the Gulf of Mexico.

Markets have slipped into a late-summer lull. Indexes have barely budged amid some of thinnest trading days this year. After three days of minuscule moves, the SP 500 index is down less than one point for the week.

Just over 10 billion shares have been traded on the New York Stock Exchange over the past four sessions, the slowest stretch since the last four days of 2011. One measure of stock-market volatility, the Vix, recently sank to a five-year low.

Kinahan said the market’s apparent lack of direction makes sense, especially ahead of the Labor Day weekend and a highly anticipated speech by Federal Reserve Chairman Ben Bernanke on Friday.

“There’s no incentive to take a big trading position,” he said. “Many people I know plan on taking a three-day weekend or are just coming in for the speech to see if (Bernanke) says anything interesting or market-moving. If not, they’re outta there.”

Among companies making news:

— WellPoint, the second-largest health insurance company in the United States, jumped $4.41, or 8 percent, to $61.80 after its CEO resigned. Investors had been frustrated with Angela Braly because of disappointing results.

— H.J. Heinz posted a 14 percent jump in quarterly net income, driven by higher prices and emerging-market sales, but revenue fell and missed Wall Street expectations. Heinz stock dropped $1.29, or 2 percent, to $56.12.

— The clothing store chain Jos. A. Bank posted stronger sales and revenue than Wall Street expected, and its stock soared $5.81, or 14 percent, to $47.44.

— Sealed Air Corp., a food packaging company, jumped 12 percent, the SP 500’s biggest gain. A former Dow Chemical executive will take over when its current CEO retires. The company’s stock gained $1.58 to $14.58.

Copyright 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Contracts to buy US homes hits 2-year high in July

WASHINGTON (AP) — Americans signed the most contracts to buy homes in July than at any other point in the last two years, further evidence of a housing recovery.

The National Association of Realtors said Wednesday that its index of sales agreements for previously occupied homes jumped 2.4 percent in July to 101.7. That’s higher than June’s reading of 99.3. It’s also the highest reading since April 2010, the last month that buyers could qualify for a federal home-buying tax credit.

A reading of 100 is considered healthy. The index is 12.4 percent higher than July 2011. It bottomed at 75.88 in June 2010 after the tax credit expired.

Contract signings typically indicate where the housing market is headed. There’s generally a one- to two-month lag between a signed contract and a completed deal.

The Realtors’ group said contract signings increased in July in all regions of the U.S. except for the West, which it said has a severe shortage of available homes for sale.

The increase is the latest sign that the home sales are finally rebounding five years after the housing bubble burst.

Last week, the National Association of Realtors said completed sales of previously occupied homes jumped 10 percent in July compared with the same month last year. Sales of newly built homes were up 25 percent in that same 12-month period.

Builder confidence rose this month to its highest level in five years. And the average rate on a 30-year fixed mortgage has been below 4 percent all year.

Home prices have also started to rise consistently, which could boost sales further in the months to come. The Standard Poor’s/Case Shiller index released Tuesday showed the first year-over-year increase in home prices since September 2010.

Still, the housing market has a long way to go to reach a full recovery. Some economists forecast that sales of previously occupied homes will rise 8 percent this year to about 4.6 million. That’s still well below the 5.5 million annual sales pace that is considered healthy.

One trend holding back sales is that inventories of homes are low.

Overall, there were 2.4 million homes for sale in July, down 24 percent in the past year. It would take about 6.4 months to exhaust that supply at the current sales pace. That’s just above the six months’ inventory that typically exists in a healthy economy.

Rock-Bottom Mortgage Rates to Rise, Experts Predict

The U.S. housing industry has been making steady gains and many analysts have already stated a firm position that the turnaround is here to stay and a full recovery is on its way. Naturally, this is set to have consequences on the historically low interest rates that many have taken for granted – and many more were unable to take advantage of. The improvement in housing data is only one factor that will act to boost mortgage rates, however. The relative quiet in the Eurozone over its crisis has also been good for the global economy and Treasury bonds yields are up, and both of these changes in the economic climate are sure to stoke the flames of the mortgage market. For more on this continue reading the following article from TheStreet.

Mortgage rates are up for the fourth week in a row, and that has inquiring minds asking one big question:

Is the most attractive interest rate environment in history coming to an end?”

The latest numbers from Freddie Mac reveal that 30-year fixed mortgage interest rates are still well under 4%, at 3.66% last week.

The BankingMyWay Weekly Mortgage Tracker has the average 30-year rate at 3.75% this week.

Nevertheless, this is a trend that has economists taking a closer look.

Freddie not only says fixed-mortgage rates are up for the fourth straight week, the mortgage giant also says that the rate of new single-family home construction is at a five-month low. That means less new homes on the market, with higher rates on the ones that are available for homebuyers.

“Fixed mortgage rates inched upward this week along with other long-term yields,” says Frank Nothaft, chief economist at Freddie Mac.

  • Freddie Mac noted Census Bureau data showing residential building permits moving up in July, although builders slowed the pace of construction starts on one-family homes in July to the least since March.
  • Apartment and condominium building picked up to the most since April.
  • Existing home sales rose in July from June’s eight-month low and the median sales price jumped 9.4% from a year earlier, representing the largest 12-month gain since January 2006. The price gain was broad-based, with annual increases registered in all four regions of the U.S. and led by a 24.5% increase in the Western U.S.

What’s driving interest rates up? Here are three significant triggers:

1. Treasury bond yields are up

As Nothaft notes, bond yields are up of late, with 10-year U.S. Treasury notes yielding 1.68% in the past week, up from 1.5% at the beginning of August. While these rates are relatively low in a historical sense, mortgage rates do track the direction of Treasury rates, and right now, those rates are moving upward.

2. Housing data has improved

Freddie Mac also notes that existing home sales are climbing, after months of soft sales activity. In addition, the median home sales price has risen 9.4% from July 2011 to July 2012. In general, the healthier the housing market, the more interest mortgage lenders charge for home loans.

3. A quiet Eurozone

For months, economists (and some real estate agents) were wringing their hands over the sovereign debt crisis in Europe. Financial troubles in Greece, Italy, Portugal and other European countries sent tremors across the globe, causing anxiety among financial markets, and among mortgage lenders, who feared a major global financial crisis. But in August, at least, Eurozone debt has held less sway in media headlines and in the market, and the relative quiet across the pond has been good for the global economy.

In reverse, rising mortgage rates likely had an economic impact. The Mortgage Bankers Association reports that U.S. mortgage applications fell by 7.4% for the week ending August 17, 2012.

A decline in mortgage applications at a time when mortgage rates are climbing may be a coincidence, but that’s unlikely. Historically, when homebuyers sense mortgage rates are higher (thus making homes more expensive), they’re less likely to try and land a mortgage.

A one-month snapshot does not a housing market make. But the last 30 days have seen a steady hike in mortgage rates.

If that continues in September, then it’s a trend, and could be a big one.

This article was republished with permission from TheStreet.

U.S. Revises Payment Terms for Fannie Mae, Freddie Mac

The U.S. Treasury Department is
altering how Fannie Mae (FNMA) and Freddie Mac pay taxpayers for the
government’s stake in the firms, ending a system that sometimes
required them to spend more on dividends than they earned.

The mortgage companies, which have drawn $190 billion in
aid and paid $46 billion in dividends since being taken over by
U.S. regulators in 2008, will turn over any quarterly profits to
the Treasury, the agency said today. The change replaces a
requirement that the companies pay quarterly dividends of 10
percent on the government’s nearly 80 percent stake.

Fannie Mae, based in Washington, and Freddie Mac (FMCC) of McLean,
Virginia, also will be required to shrink their investments in
mortgages and mortgage-backed securities by 15 percent annually,
up from 10 percent, the Treasury said.

“We are taking the next step toward responsibly winding
down Fannie Mae and Freddie Mac, while continuing to support the
necessary process of repair and recovery in the housing
market,” Michael Stegman, counselor to the secretary of the
Treasury for housing finance policy, said in the statement.

Both Fannie Mae and Freddie Mac this month reported second-
quarter profits even after paying dividends on Treasury’s
preferred shares, marking the first time either company had
enough revenue to avoid taking a Treasury draw since the first
quarter of 2011. In some quarters, the government-sponsored
enterprises sought aid because operating profits were exceeded
by their dividend obligations.

Preferred Shares

Fannie Mae’s 8.25 percent preferred perpetual shares
slumped 55 percent to $1.05 as of 4 p.m. after the Treasury
Department announcement.

One motivation for the change was Treasury’s concern that
investors would be skittish about buying GSE bonds after Jan. 1,
when a ceiling on government support for the companies kicks in,
according to a banker who discussed the policy with Treasury
officials. Each company will be limited after that to no more
than $200 billion in taxpayer support.

Treasury spokesman Matt Anderson declined to comment on the
agency’s motivation beyond the contents of the statement.

The new system means that the companies will be unlikely to
reach the aid ceiling, analysts for Barclays Research said in an
e-mailed report.

“This puts to rest any worries about GSE credit risk even
in intermediate maturities,” the Barclays analysts said.

Yields Fall

A Bloomberg index of yields on Fannie Mae-guaranteed
mortgage bonds trading closest to face value fell about 1 basis
point to 129 basis points, or 1.29 percentage points, higher
than an average of five- and 10-year Treasury rates as of 3 p.m.
in New York. The spread yesterday reached the widest in a month.
The yield relative to U.S. government debt on its unsecured
notes due August 2017 fell 4 basis points to 14 basis points,
the lowest since the debt’s July 18 issuance.

The new payment structure accelerates the rate at which the
risk in the companies’ portfolios is transferred to private
investors and makes it impossible for Fannie Mae and Freddie Mac
to rebuild capital. At the same time, it doesn’t address the
broader question of the future of the two companies, which own
or guarantee about 60 percent of U.S. home loans.

Republicans in Congress have called for an end to Fannie
Mae and Freddie Mac. Treasury Secretary Timothy F. Geithner has
said he will propose a housing finance overhaul that may include
dismantling the firms. Geithner said at the beginning of this
year that the administration would release a wind-down plan by
the spring. No plan has been released.

‘Blunts Efforts’

Representative Spencer Bachus, the Alabama Republican who
leads the House Financial Services Committee, said Treasury’s
move “blunts efforts to reform Fannie and Freddie.”

“The administration took its first step toward GSE reform
in nearly four years today,” Bachus said in a statement.
“Unfortunately, rather than announcing steps to wind down
Fannie Mae and Freddie Mac, the administration opted to create a
permanent, off-budget source of funding for housing that it will
control.”

Representative Scott Garrett, a New Jersey Republican, said
the new policy amounted to “continuing to kick the can.”

“Instead of devoting time and energy towards prolonging
bailouts, the Obama Administration should work with Congress to
wind these companies down and create a new and sustainable
housing finance system where taxpayers are not at risk,”
Garrett said in an e-mailed statement.

Peter Wallison, co-director of the American Enterprise
Institute
’s program on financial policy and a frequent critic of
the GSEs, said the new arrangement will help ensure the
companies eventually are wound down.

‘Good Idea’

“The most significant issue here is whether Fannie and
Freddie will come back to life because their profits will enable
them to re-capitalize themselves and then it will look as though
it is feasible for them to return as private companies backed by
the government,” Wallison said in a telephone interview. “What
the Treasury Department seems to be doing here, and I think it’s
a really good idea, is to deprive them of all their capital so
that doesn’t happen.”

Karen Shaw Petrou, founder and managing partner of Federal
Financial Analytics in Washington, said winding down the GSEs
isn’t “a realistic prospect any time soon.”

“Regardless of this agreement, the GSEs will still be the
bulwark of U.S. mortgage finance — not exactly a wind-down,”
she said in a statement. “Treasury could have changed the
agreement any time over the past four years and, had it done so,
the GSEs now would be a lot more stable and a real wind-down a
lot more likely.”

To contact the reporters on this story:
Cheyenne Hopkins in Washington at
chopkins19@bloomberg.net;
Clea Benson in Washington at
cbenson20@bloomberg.net

To contact the editors responsible for this story:
Gregory Mott at
gmott1@bloomberg.net;
Chris Wellisz at
cwellisz@bloomberg.net


Enlarge image
U.S. Treasury Accelerates Winddown of Fannie and Freddie

U.S. Treasury Accelerates Winddown of Fannie and Freddie

U.S. Treasury Accelerates Winddown of Fannie and Freddie

Andrew Harrer/Bloomberg

Republicans in Congress have called for an end to the two taxpayer-owned companies, which now own or guarantee about 60 percent of U.S. home loans.

Republicans in Congress have called for an end to the two taxpayer-owned companies, which now own or guarantee about 60 percent of U.S. home loans. Photographer: Andrew Harrer/Bloomberg

Lincoln County Realtors Push for New Wildfire Policy


(Source: Jim Kalvelage Ruidoso News, N.M. (MCT) — The Ruidoso/Lincoln County Association of Realtors has asked its cohorts in the state and the mountain west to begin a push for wildfire emergency management prevention legislation on the national level.

In a resolution on wildfires, the local real estate organization stated that wildfires are a growing natural hazard posing a threat to life and property. The resolution requests the Realtors Association of New Mexico and the Rocky Mountain Region of the National Association of Realtors formally seek legislation to change policies on the response to wildfires. It also calls for wildfire emergency management prevention to become a federal public policy priority for the National Association of Realtors. The effort follows the destructive Little Bear Fire.

“One of our visions from the Board of Realtors was that we have a state and national organization out there that has lobbyists and they have homeowner issues that they work on very hard on a national level,” said James Paxton, president of the Ruidoso/Lincoln County Association of Realtors. “We’re finding that when you say on a national level we need help with a resolution on wildfires there about a seven-state area here that understands that. You start getting back to Washington where a lot of these people are within our organization they’re not as, it seems, to be as excited about it.”

Copies of the resolution will be provided to the state Realtors group, regional officials, the 2013 chair of the National Association

of Realtors State and Local Issues Committee, and the 2012 and 2013 presidents of the National Association of Realtors.

“And then we’ve also sent this to every board of Realtors in Arizona, in New Mexico, Colorado and Wyoming, thinking that they may be doing their own things but if they can see something that we’re doing and piggyback and we’re trying to do the same things that some of the people in Colorado Springs, what are you doing right now to try to make some changes?”

A June fire in the Colorado Springs area destroyed nearly 350 houses.

Paxton said every time homes are burned in a wildfire the results are the same.

“Here’s just my simplistic approach to this. If we don’t do something different in a timeframe that’s not in Congress three or four years from now still talking about it or wishing we could get it changed, next spring we could have exactly the same situation that we have right now. So I think in terms of policy, that obviously pretty wishful thinking but that’s what we’re hoping to continue pushing towards in terms of policy.”



Realtor Cindy Lynch said the National Association of Realtors can influence federal legislation.

“At some point we’re hopeful that NAR will put this on their top 10 list of priorities, hopefully in 2013,” Lynch said. “And once they come out with their plan, it’s like when we hit Washington with Call for Action, they’re bombarded.”

Paxton said the resolution is a starting place.

“Hopefully we can start getting some attention.”

———

©2012 the Ruidoso News (Ruidoso, N.M.)

Visit the Ruidoso News (Ruidoso, N.M.) at www.ruidosonews.com

Distributed by MCT Information Services

Source: Jim Kalvelage Ruidoso News, N.M. (MCT)


July Pending Home Sales Rebound

WASHINGTON, DC–(Marketwire -08/29/12)-
Pending home sales rose in July to the highest level in over two years and remain well above year-ago levels, according to the National Association of Realtors®.

The Pending Home Sales Index,* a forward-looking indicator based on contract signings, rose 2.4 percent to 101.7 in July from 99.3 in June and is 12.4 percent above July 2011 when it was 90.5. The data reflect contracts but not closings.

Lawrence Yun, NAR chief economist, said the index is at the highest level since April 2010, which was shortly before the closing deadline for the home buyer tax credit. “While the month-to-month movement has been uneven, more importantly we now have 15 consecutive months of year-over-year gains in contract activity,” Yun said.

Limited inventory is constraining market activity. “All regions saw monthly increases in home-buying activity except for the West, which is now experiencing an acute inventory shortage,” Yun added.

The PHSI in the Northeast increased 0.5 percent to 77.0 in July and is 13.4 percent higher than a year ago. In the Midwest the index grew 3.4 percent to 97.4 in July and is 20.2 percent above July 2011. Pending home sales in the South rose 5.2 percent to an index of 111.7 in July and are 15.6 percent above a year ago. In the West the index slipped 1.7 percent in July to 109.9 but is 1.3 percent higher than July 2011.

Existing-home sales are projected to rise 8 to 9 percent in 2012, followed by another 7 to 8 percent gain in 2013. Home prices are expected to increase 10 percent cumulatively over the next two years.

“Falling visible and shadow inventories point toward continuing price gains. Expected gains in housing starts of 25 to 30 percent this year, and nearly 50 percent in 2013, are insufficient to meet the growing housing demand,” Yun said.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1 million members involved in all aspects of the residential and commercial real estate industries.

*The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing.

The index is based on a large national sample, typically representing about 20 percent of transactions for existing-home sales. In developing the model for the index, it was demonstrated that the level of monthly sales-contract activity parallels the level of closed existing-home sales in the following two months.

An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined as well as the first of five consecutive record years for existing-home sales; it coincides with a level that is historically healthy.

NOTE: Existing-home sales for August will be reported September 19 and the next Pending Home Sales Index will be on September 27; release times are 10:00 a.m. EDT.

Information about NAR is available at www.realtor.org. News releases are posted in the website’s “News and Commentary” tab. Statistical data in this release, as well as other tables and surveys, are posted in the “Research and Statistics” tab of www.realtor.org.

For further information contact:
Walter Molony
202/383-1177
Email Contact

Coakley picks fight with GSE’s

Today’s Boston.com headlines sent to your inbox every morning.

Tweaking Fannie Mae and Freddie Mac’s Bailout

Mortgage giants forcing lenders to buy back defaulted loans



A Freddie Mac sign sits in front of its headquarters July 10, 2008 in McClean, Virginia. (Chip Somodevilla/Getty Images)

A Freddie Mac sign sits in front of its headquarters July 10, 2008 in McClean, Virginia. (Chip Somodevilla/Getty Images)

“);

The U.S. Department of the Treasury and the Federal Housing Finance Agency (FHFA) announced on Aug. 17 that they would accelerate the dismantling of Fannie Mae (the Federal National Mortgage Association) and Freddie Mac (the Federal Home Loan Mortgage Corp.), the two U.S. government mortgage giants.

The Treasury told U.S. taxpayers in their release that the modifications would “make sure that every dollar of earnings each firm generates is used to benefit taxpayers, and support the continued flow of mortgage credit during a responsible transition to a reformed housing finance market.”

Going forward, the two companies have to shrink their investment portfolios by 15 percent per year, instead of 10 percent. The objective is to reduce the portfolios to $250 billion four years ahead of what was initially negotiated.

Additionally, instead of earning a 10 percent dividend on their preferred stock investments in the two government-sponsored enterprises (GSEs), Treasury must turn over all profits to the taxpayers.

According to the Treasury announcement, the modifications will accomplish multiple objectives, including “acting upon the commitment made in the Administration’s 2011 White Paper that the GSEs will be wound down and will not be allowed to retain profits, rebuild capital, and return to the market in their prior form.”

When Fannie Mae and Freddie Mac were forced to accept conservatorship on Sept. 6, 2008, the intent was to shrink the two GSEs, protect the assets and property, and get the balance sheets into order.

“The plan was to shrink the balance sheets of these mortgage goliaths to reasonable levels and transfer some of the mortgage business back to the private sector. Since that time, we have seen the balance sheets of these giants continue to grow and encompass more of the total mortgage market in the United States,” according to a recent article on the Seeking Alpha website.

Forcing Lenders to Repurchase Defaulted Loans

According to a March 19 brief on the Mortgage Bankers Association’s (MBA) website, “The volume of mortgage buyback/repurchase demands by Fannie Mae and Freddie Mac continues at unprecedented levels. … During the past three years alone, Fannie Mae and Freddie Mac have made close to $100 billion in repurchase demands.”

On the same subject, The World of Mortgage website explained that “Fannie Mae and Freddie Mac have expanded efforts to get refunds on soured mortgages, boosting the cost of faulty home loans and foreclosures at the biggest U.S. banks since 2007 to at least $84 billion.”

The MBA advised that mortgage loans that were made to unqualified buyers by lenders using shoddy credit analysis procedures should be repurchased by said lenders. However, loans that defaulted for other reasons than the aforementioned should not qualify under the buyback/repurchase demands by the GSEs.

The buyback demands by the GSEs are “preventing many qualified borrowers from obtaining a mortgage. Refinancings are also hobbled by repurchases because lenders are less willing to refinance another lender’s loans,” according to the MBA brief.

The two GSEs hope to reduce the bailout cost to taxpayers by $190 billion with their buyback/repurchase demands to U.S. banks. As a result, some of the banks involved in the buyback scheme had their stock prices reduced significantly.

On Jan. 8, 2008, Bank of America Corp.’s closing stock price was $44.15 and by Aug 1, 2012, it was at $8.15, taking the largest hit among its fellow banks. On the same dates, JPMorgan Chase Co.’s stock prices were $47.40 and $37.37 respectively.

Several of the major U.S. banks, including Bank of America Corp., Citigroup Inc., JPMorgan Chase Co., and Wells Fargo Co. reserved a combined $3 billion to buy back loans from the GSEs.

Bank of America had to boost its reserves by $677 million, mainly because Countrywide Financial Corp., the company it bought in 2008, was one of the main culprits in the foreclosure debacle. Fannie Mae had bought a large volume of Countrywide’s mortgages, according to The World of Mortgage website.

Bank of America expects to be hit with more buyback requests from the GSEs. John McDonald, analyst at Sanford C. Bernstein, was quoted on the Alacra Pulse website as estimating that the “Bank of America has worked through about two thirds of its potential repurchase requests and that it may eventually pay another $5 billion above its existing reserves.”

Bank of America and Fannie Mae are arguing as to how much of the defaulted loans the lender has to buy back.

“The lender, which has called some claims ‘inconsistent,’ refused to buy back most loans and stopped selling new mortgages to Fannie Mae in February. Unresolved demands for buybacks from the GSE swelled to $9.42 billion as of June 30, compared with $5.45 billion at the end of 2011,” according to The World of Mortgage.

Wells Fargo had reserved $1.8 billion toward buybacks from the GSEs, but suggested that it might lose another $2.6 billion, according to Reuters as quoted on the Appraisal Institute website.

Also, according to First Horizon National Corp.’s second quarter 2012 consolidated income statement, the mortgage buyback scheme caused the company to report a $121.9 million loss.

“We believe mortgage repurchase expense will continue to remain an overhang for First Horizon. … It bears the liability for the conforming conventional mortgage loans purchased by the GSEs from First Horizon that were originated over many years till 2008,” the TopStockAnalysts article stated.

According to an article on the 4-traders website, the PNC Financial Services Group Inc. had to pay $1.6 billion under the mortgage repurchase program and had to reserve another $350 million during the second quarter of 2012.

“Mortgage buyback and repurchase demands appear to be an issue that will not go away. Lenders have faced only a small subset of what is projected to be more than $120 billion in repurchase losses stemming from loans made between 2005 and 2008. … The size of the liability is staggering,” according to the Inside Mortgage Finance website.

Rating Agency Reviews

“Future GSE claims still appear unlikely to impair capital positions materially, we do not expect the level of repurchase claims, viewed in isolation, to have a large impact on U.S. bank ratings,” Fitch Ratings said in a July article on its website.

Standard Poors (SP) stated in its U.S. Large Regional Banks Industry Report Card that given satisfactory second quarter 2012 financial results, satisfactory liquidity, and good earnings for the banking industry, it did not foresee any deterioration in the financial condition of the banks.

“U.S. large regional banks’ financial performance was generally consistent with our expectations for the second quarter. Consequently, our outlooks on the vast majority of rated institutions remained stable,” SP advised.

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