Freddie Mac May Force More Buy-Backs

Due to a marked increase in the number of loans where mortgage insurance has been denied or cancelled, Freddie Mac has warned servicers and mortgage holders that it may increasingly demand the mortgage holders to buy back loans when it is determined that mortgage insurance coverage is not present.  Freddie Mac requires that before it can buy up a loan any mortgage at 80% or less LTV must carry mortgage insurance. Lenders have until September 30 to settle up any claims that have already been made, or to provide proof that mortgage insurance coverage is in place.

This buy-back provision has been stinging the balance sheets of the major mortgage lenders of late.  Bank of America was forced in this month to buy back many more loans than it has previously expected jeopardizing cash flow and profits. Other lenders may be in the same boat.