Mortgage Buybacks to Cost $3.4 Billion from Freddie Mac

Freddie Mac may win an additional $3.4 billion in mortgage buybacks from banks under increased scrutiny of defaulted loans originated during the housing bubble, according to a U.S. auditor’s report. Freddie Mac could save $800 million to $1.2 billion for reviews completed this year alone, according to the report. That money will benefit U.S. taxpayers, who have spent $190 billion to aid Freddie Mac and larger rival Fannie Mae since they were taken into federal conservatorship in 2008. The two government-sponsored enterprises provide liquidity by buying mortgages and packaging them into securities on which they guarantee interest and principal payments. They can force banks to repurchase loans if reviews find the underwriting didn’t meet standards set out in sales contracts. The increased scrutiny cited in the FHFA report applies to defaulted loans already owned or guaranteed by the GSEs. In response to bank complaints that the repurchase requests were too aggressive, the agency this week announced changes in review procedures for loans delivered after Jan. 1.



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