WASHINGTON – 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.
Bank of America Corp., Wells Fargo & Co., JPMorgan Chase & Co., Citigroup Inc. and Ally Financial Inc., set aside almost $3 billion to buy back bad home loans in the first half of 2012, according to data compiled by Bloomberg. Regional lenders including SunTrust Banks Inc. disclosed at least $1.3 billion of added costs, exceeding their total for all of 2011.
“More and more financial institutions are reporting this, and some of those that behaved themselves pretty well during the mortgage cycle are starting to see this happen,” Blake Howells, an analyst with Becker Capital Management Inc., which oversees about $2.3 billion, including shares in JPMorgan and PNC Financial Services Group, told American Banker, an affiliate of Credit Union Journal. “It certainly impairs earnings power.”
Fannie Mae and Freddie Mac are stepping up attempts to hunt down and sell back faulty mortgages bought from lenders during the U.S. housing bubble, according to bankers, investors and analysts. The goal is to whittle down the $190 billion cost of bailouts for the two taxpayer-backed firms. Investors’ concern about the potential damage helped push Bank of America’s stock down 40% since the end of 2010 and discouraged some banks from writing new mortgages, regulators have said.