Repurchases
Preventing loan repurchases requests from mortgage guarantors has been a major issue for mortgage bankers over the past decade. In the early years of the last decade, the GSEs dramatically increase the number of repurchase and make-whole demands stemming from defaulted or poorly underwritten loans from the pre-2008 era. The table below shows the count of monthly repurchases for loans purchased by FNMA in 2008. [The 60-month point is roughly equal to July 2013.]
The growing backlash from lenders propelled the GSEs to revamp their QC processes and introduce new programs like Day One Certainty. These programs were designed to decrease lender underwriting errors and reduce their exposure to future repurchases demands. The question is, 5 years in, have these programs lived up to initial ballyhoo?
Well, generally yes.
A comparison between 2008 and 2014 originations purchased by FNMA shows two distinctly separate repurchases curves. 2014 clearly shows nearly all repurchases occurred with the first 20 months of origination. This is in stark contrast to the 2008 book year where a majority of repurchases occurred after 36 months of seasoning. It is important to note this graph does not show that repurchases have been eliminated rather than FNMA’s QC and repurchase processes have become more predictable.
Conclusion
If the 2014 repurchase curve is indicative of the new GSE repurchase reality; what and where are the remaining risks from repurchases?
?CAllc RP has intensively analyzed and researched the GSE credit data to answer these and other questions. We have prepared an extensive analysis and summarized our recommended action steps to better manage your residual exposures to GSE repurchases risks. Additionally, we have studied GSE MI rescissions and post-liquidations repurchases to better help to understand those risks. The remainder of this FNMA Repurchase analysis is available for purchase in a PDF or Excel format. In addition, we are available to provide customized research, advice or consulting projects on these others or topics.
CAllc Research Publications