Even with new of more potential lawsuits to these giant banks, they don’t seemed worried about it.
By Kerri Ann Panchuk October 12, 2012 • 12:23pm
The 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
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