Fannie Mae and Freddie Mac have about $300 billion in loans to borrowers that are delinquent, or at least 90 days behind on payments. As a result, the two tax payer financed GSEs have enlisted an army of auditors to comb through mortgage files in search of unsatisfactory or false documentation of borrowers' incomes.
And now they're making banks pay for those shoddy mortgage files and suspect underwriting standards. During the first nine months of 2009, Freddie Mac required lenders to buy back $2.7 billion of loans. Fannie Mae will not share it's figures, but Inside Mortgage Finance estimates that Fannie demanded $4.3 billion in mortgage buybacks during those first nine months of '09.
Banks have also been forced to buy back loans from mortgage backed securities when problems are detected with loans that have been bundled into pools of mortgages. Banks repurchased about $14.2 billion in mortgages overall in the first nine months of 2009, which threatens to wipe out a big portion of their loan origination profits.
Last Thursday, Fannie Mae indicated that 5.29% of it's loans were at least 90 days late, up from 2.13% in the previous year. Freddie reported a 3.87% delinquency rate, up from 1.72% a year ago. As a result, banks have tightened lending standards as average credit scores for loans backed by Fannie and Freddie have risen to 760 from 720 a year ago.
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