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THE LATEST SECONDARY MARKET GSEs Shift Focus F for Repurchases FINDINGS FROM FITCH SHOW THAT THE ENTERPRISES ARE MAINTAINING THEIR PACE FOR REPURCHASES, WHILE SHIFTING THE SPOTLIGHT ONTO SMALLER LENDERS. slowing down on repurchase requests and focus seems to be shifting from the largest institu- tions to midtier regional banks. If this does happen, the rating itch Ratings recently released a notation stat- ing that Fannie Mae and Freddie Mac won't be agency said those banks will start to feel the pressure for claims-related earnings. Fitch said recent announcements from PNC, SunTrust, and First Horizon expressed an intent to increase reserves against future GSE mortgage repurchase claims, which suggests Fannie and Freddie may be eyeing regional institutions. The more recent targets for repurchase claims requests have been the five largest mortgage originators: Bank of America, JPMorgan, Citigroup, Wells Fargo, and Ally Financial. Up until now, Fitch said they have collectively accounted for more than 85 percent of repurchase claims by the GSEs and private label securities (PLS) holders. For just those five institutions Freddie Mac's Portfolio I alone, the rating agency said outstanding repurchase claims totaled $24.7 billion as of March 31 of this year, a 20 percent increase from the 2011 first quarter. Out of those five banks, Bank of America represents about 60 percent of the total outstanding claims. However, Fitch said future GSE claims seem unlikely to im- pair capital positions materially, so the level of repurchase claims is not expected to have a large impact on U.S. bank ratings. While regional banks still incur costs related to litigation and repurchase claims for private label MBS issuances, Fitch said it believes those costs should be smaller than similar costs the largest banks face. annualized growth rate, ac- cording to the GSE's Monthly Volume Summary for May. The summary showed that ncreases in all aspects of Freddie Mac's total mort- gage portfolio led to a higher (but still negative) sales both increased year-over- year, liquidations dropped im- mensely: -$45.4 billion compared with -$26.7 billion in May 2011. The balance for May's total Freddie Mac's total mortgage portfolio for the month shrank at an annualized rate of 9.4 percent, a drop from 14.1 percent in April but still far above March's 2.9 percent contraction rate. The negative annualized growth rate YTD is 6.8 percent. The different contributors to the total portfolio all saw increases in May: Purchases and issuances increased nearly $5 billion, while sales and liquidations increased approximately $1.3 billion and $2 billion, respectively. Values of sales and liquida- While purchases/issuances and Shrinks Despite May Growth Recent data from the GSE presents mixed results regarding the summary of Freddie's portfolio. investments' growth, the ending balance still fell nearly $10 billion from April. The balance for May was approximately $592 billion. Mortgage-related securities and mortgage portfolio was $2.02 tril- lion, a relatively small decrease from April's $2.03 trillion but down year-over-year quite a bit from $2.13 trillion. Freddie Mac's mortgage-related investments portfolio also saw some growth, showing an annual- ized growth rate of -19 percent and bringing the YTD rate up to -22.5 percent (compared to April's -23.8 percent). May 2011 was the last month to date that saw a positive annualized growth rate (5 percent). The growth in the portfolio tions are both in the negative. However, further increases could bring sales values into positive numbers in the coming months. seems largely to have come from a major lift in mortgage-related purchases, which shot up from $1.8 billion in April to $6.8 billion in May. The aggregate unpaid balance was approximately $9.5 billion. Though purchases and sales led to the mortgage-related other guarantee commitments shrank in May at an increased rate of 9.7 percent, continuing a drop that started in April. This decrease was triggered by a further drop in issuances from approximately $32 billion in April to $28.9 billion in May. Single-family refinance-loan purchases and guarantee volume was $22.1 billion, representing 72 percent of total mortgage portfo- lio purchase and issuances. The single-family seriously delinquent (90-plus days) rate decreased slightly to 3.5 percent in May (from 3.51 percent in April), while the multifamily delinquency rate increased to 0.26 percent (from 0.25 percent a month before). The GSE's total number of loan modifications in May was 5,091, bringing the YTD total to 22,222. THE M REPORT | 71 ORIGINATION SERVICING ANALYTICS SECONDARY MARKET