Monday, September 25, 2006

BusinessWeek on Mortgage Loan Buybacks

by Bill McBride on 9/25/2006 01:01:00 AM

From BusinessWeek: Bad Blood Over Bad Loans

Mortgage-backed securities issuance soared from $184.5 billion in 2000 to nearly $1 trillion in 2005, generating more than $1 billion in fees last year.

But now that the real estate tide is ebbing, trash is starting to wash up on shore. Mortgage delinquencies are zooming ...

In some cases, the original lenders are taking the biggest hits. In typical deals, banks agree to buy mortgages back from Wall Street in the case of a payment default within the first 90 days. Now some are writing big checks. ...
The article lists some of the lenders buying back loans: H&R BLock, NetBank and Fremont.
A few lenders have refused to buy back loans, prompting arbitrations and lawsuits. Bear, Stearns & Co.'s (BSC ) mortgage affiliate, EMC Mortgage Corp. of Irving, Tex., is suing New York lender MortgageIT over $70.5 million in disputed buybacks. ... And Lehman Brothers Inc. (LEH ) is trying to recoup $20 million on toxic loans bought years ago from Beverly Hills Estates Funding Inc., whose principal, Charles Elliott Fitzgerald, is believed to have fled the country to a South Pacific island.
And this is probably just the beginning.