ATLANTA—Mortgage originators are pushing back against push-backs.
“The industry has to stand up and say, ‘Enough is enough,’” Ronald McCord of the First Mortgage Co. in Oklahoma City said during the opening session of the Mortgage Bankers Association's annual convention here last week. "We're going to have to bring this to a head."
Fannie Mae, Freddie Mac and other investors have been pressing lenders to repurchase loans they deem faulty in ever-increasing numbers. But McCord, who chaired the MBA in 1997, called many of their claims "frivolous" and said it is time to draw a line in the sand.
However, not everyone on the convention's opening panel with the former MBA leader agreed that investors' demands to live up to their promises to buy back defective mortgages have been excessive—or unnecessary.
Daniel Arrigoni, president of Minneapolis-based U.S. Bank Home Mortgage, said his institution has been hit with more repurchase requests than ever. "But the number is still manageable," he said. And generally reasonable.
"We go over those loans with a fine-tooth comb, and have been successful in getting investors to rethink a few repurchase requests," Arrigoni said. "But overall, most requests are probably fair."
However, McCord told National Mortgage News that many of the buyback requests his small Oklahoma shop has seen are out of line. The company originates $1 billion in new loans annually.
The former MBA chair said First Mortgage is usually successful in pushing back push-backs. "We probably prevail 60% to 70% of the time," he said, but the company has to "spend a lot of capital and time" in the process.
Lenders "are wasting a lot time on frivolous" repurchase requests, he said.
E. Todd Chamberlain, executive vice president of retail lender Regions Financial Corp., Birmingham, Ala., also sited the expense of reviewing buyback requests, which must be reviewed on a loan-by-loan basis.
And another panelist, William Emerson, chief executive officer at Quicken Loans, said he'd like the business to take a "more united" approach when it comes to repurchase requests, which he called "an annoyance."
"We all know we signed up for reps and warrants, but I don't think we knew we signed up to be insurance companies," Emerson said.
McCord told the conference that the situation has gotten so bad that some originators are so fearful of repurchase that they are tightening their underwriting standards, refusing to sell their production to investors on the secondary mortgage market or simply ceasing to make any new loans at all.
"We're trying to be out here lending to help the recovery," McCord said. "It's hampering the recovery, so we're going to have to bring this to a head."
Another former MBA chair, Herbert Tasker, agreed. "The level of push-backs in really bad," Tasker, who led the organization in 1993, told National Mortgage News. "If it continues, by this time next year, we will lose 15% to 20% of the country's small independent mortgage bankers."
