Even with new of more potential lawsuits to these giant banks, they don’t seemed worried about it.
Wells Fargo lightens contributions to mortgage putback risk buffer
By Kerri Ann Panchuk October 12, 2012 • 12:23pmThe provisions set aside to cover potential loan repurchase requests at Wells Fargo & Co. ($33.90 -0.35%) grew 15% during the third quarter, according to the company’s earnings report.
At the beginning of the period, the company put repurchase liability at roughly $1.8 billion. By quarter’s end, that number grew roughly 15% to $2.03 billion.
Still, the bank added fewer reserves to hedge buyback risk in 3Q, increasing its reserve only $462 million during the period. That’s down from the $669 million buffer added to its repurchase-risk reserves in the second quarter.
By September 30, the number of GSE loans subjected to unresolved repurchase requests hit 6,525 loans. In addition, 1,513 private loans are classified as potential repurchase risks, while 817 loans under Wells Fargo’s umbrella remain at risk of mortgage insurance rescissions—or insurer buyback requests.
Still, Wells Fargo executives on a conference call remained positive about repurchase risk, suggesting the need to add fewer repurchase reserves in 3Q was an improvement.
They also point to the housing recovery, which if it continues, can buoy home values giving borrowers more equity in their homes.
Furthermore, as the deadline for the statute of limitations grows nearer for loans originated in 2006 and 2007, repurchase risk and related litigation could decline, the executives suggested.
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Proprietary OC Housing News home purchase analysis
2335 DAHLIA Dr Tustin, CA 92780
$329,900 …….. Asking Price
$123,000 ………. Purchase Price
12/24/1996 ………. Purchase Date
$206,900 ………. Gross Gain (Loss)
($9,840) ………… Commissions and Costs at 8%
============================================
$197,060 ………. Net Gain (Loss)
============================================
168.2% ………. Gross Percent Change
160.2% ………. Net Percent Change
6.4% ………… Annual Appreciation
Cost of Home Ownership
——————————————————————————
$329,900 …….. Asking Price
$11,547 ………… 3.5% Down FHA Financing
3.40% …………. Mortgage Interest Rate
30 ……………… Number of Years
$318,354 …….. Mortgage
$87,671 ………. Income Requirement
$1,412 ………… Monthly Mortgage Payment
$286 ………… Property Tax at 1.04%
$0 ………… Mello Roos & Special Taxes
$82 ………… Homeowners Insurance at 0.3%
$332 ………… Private Mortgage Insurance
$153 ………… Homeowners Association Fees
============================================
$2,265 ………. Monthly Cash Outlays
($208) ………. Tax Savings
($510) ………. Equity Hidden in Payment
$12 ………….. Lost Income to Down Payment
$61 ………….. Maintenance and Replacement Reserves
============================================
$1,621 ………. Monthly Cost of Ownership
Cash Acquisition Demands
——————————————————————————
$4,799 ………… Furnishing and Move In at 1% + $1,500
$4,799 ………… Closing Costs at 1% + $1,500
$3,184 ………… Interest Points
$11,547 ………… Down Payment
============================================
$24,328 ………. Total Cash Costs
$24,800 ………. Emergency Cash Reserves
============================================
$49,128 ………. Total Savings Needed
The property above is available for sale on the MLS.
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The report echos the industry belief that they can resolve their bad loans through short sales. It won’t work. There are too many committed squatters who won’t participate.
Ratings Agency Forecasts a Stronger Year for Short Sales in 2013
Even though the number of foreclosure filings has risen dramatically in recent months in some parts of the country—specifically in judicial states—the ratings agency DBRS expects total foreclosure filings to show evidence of a steady decline in 2013 when compared to 2012.
This is due to “the record number of servicers that are using short sales as their primary loss mitigation tool to prevent delinquent loans from entering foreclosure,” the agency’s analysts said in a research note issued Monday.
The Office of the Comptroller of the Currency (OCC) found evidence of such a shift as early as 2012’s first quarter. With the release of its Q1 mortgage performance report, the federal regulator noted that the number of home retention actions implemented over the January-to-March timeframe was down 36.7 percent from a year earlier, while the number of short sales increased 19.7 percent.
New short sale actions completed during the first quarter of this year totaled 59,996, according to the OCC’s latest report covering about 60 percent of all first-lien mortgages in the United States. Over the second-quarter period, another 63,403 short sale actions were completed by the 60-percent subject population.
While it will be another two-and-a-half months before the OCC releases its third-quarter mortgage performance data and mitigation numbers, anecdotal evidence from those in the field suggests the increase in short sales is likely to carry forward.
Rudimentary projections based on the quarter-to-quarter increase seen earlier this year would mean another 138,000 completed short sales during the second half of 2012 among the 60-percent first-lien population analyzed by the OCC.
DBRS believes short sales will be an effective loss mitigation tool for curbing the industry’s shadow inventory backlog of unsold REO properties. Short sales are an effective way to get the home sold without having to incur the cost of foreclosure, preparing the home for sale, paying a listing agent, and maintaining the property, therefore lowering loss severity, the agency’s analysts noted.
As a result, DBRS expects short sales to be one of the key loss mitigation techniques used in 2013 with more servicers delegating or automating their acceptance and counter offer process in order to be more responsive to short sale bids on properties.