Banks’ Buybacks of Defaulted Single-Family Loans Surge
Banks had to buy back $7.1 billion in defaulted single-family loans in the third quarter to reimburse mortgage investors, up from $1.9 billion in the previous quarter. Federal Deposit Insurance Corp. Call Report information shows that most of the buyback demands fell on JPMorgan Chase and Bank of America. Chase repurchased $2.7 billion in defaulted loans and BoA repurchased $2.3 billion to satisfy investor demands. Both are on the hook for troubled loans they took control of when they purchased ailing mega-thrifts — Countrywide in the case of BoA and Washington Mutual by Chase. The FDIC information also lists buybacks by Citibank ($898 million), National City Bank ($361.6 million), Wells Fargo Bank ($266 million) and SunTrust Bank ($232.3 million).
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Perhaps if the big banks such as NCB who stopped funding loans on their books “for their own reasons” that were not in default, such as commercial loans on projects that were over 70% complete and sold, the damage throughout the economy would not be so great.
Those loans that were forced into default though still viable would likely have paid the banks back in full, and the multitude of small businesses, small banks and employees that are now suffering through losses, bankruptcies, and foreclosed home mortgages due to the loss of jobs would not be such a factor in the economy today.