From the January 30, 2010 Wall Street Journal article by Nick Timiroas, Fannie Mae and Freddie Mac are starting the process of chasing down mortgage originators (or their successors) for repurchase obligations. With about $300 billion in loans to borrowers at least 90 days behind on payments, Fannie and Freddie have started to sift through mortgage files for proof of underwriting flaws. The default is usually the first sign of a possible breach of a representation or warranty in the mortgage loan sale document.
The result so far, as reported by Mr. Timiroas, is that Freddie Mac required lenders to buy back $2.7 billion of loans in the first nine months of 2009, a 125% jump from $1.2 billion a year earlier. Mr. Timiroas reports that Fannie Mae won't disclose its figure, but trade publication Inside Mortgage Finance said Fannie made $4.3 billion in loan-repurchase requests in the first nine months of 2009. This corresponds to the fact that the loans would probably have a origination dates in 2006 and 2007, where the quality of the underwriting and the type of loans originated (i.e. stated income, interest only 2/28 and 3/27) would give rise to significant defaults.
While this report was for the Fannie/Freddie portfolio, the non-agency paper would have a corresponding need for increased scrutiny of its defaulted portfolio. The issue is whether the private investors of RMBS have the same desire to chase after money that belongs to them. SASA can provide that support.
