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THE LATEST ANALYTICS 'Volatile' Buyback Claims Up for Bigger Banks Fitch Ratings is reporting an uptick in repurchase statistics among the nation's largest financial institutions, but does the trend have staying power? W F under way, others signal that hile some signs suggest the housing recovery may finally be banks will likely continue to see repurchase claims from Fannie Mae and Freddie Mac. Analysts with Fitch Ratings found found that repurchase risk remains high for several financial institutions, including Bank of America, JPMorgan Chase, and Ally Financial. According to Fitch, repurchase ings agency "continues to believe that repurchase claims represent a moderate pressure to earnings provement. Buyback claims fell 10 percent for the company on a linked-quarter basis. The report held that JPMorgan Chase's outstanding claims still hover at 94 percent. Fitch analysts wrote that the rat- risk climbed to 41 percent for Bank of America. Roughly 60 percent of the claims stemmed from private-label requests. For Citigroup, outstanding claims from the first quarter rose to 12 percent from the previous year. Wells Fargo saw some im- at these financial institutions, and that the GSEs will increasingly focus on smaller originators as they continue to work their way" through claims from just before the financial crisis. Analysts nonetheless noted "a great degree of volatility" occurring as a result of buyback claims, with Bank of America's repurchases up 40 percent to $395 million over the second quarter this year but down year- over-year, even with $8.6 billion in Countrywide settlement charges. What will more repurchase risk mean for big banks? As Fannie and Freddie devote more resources to buybacks, accord- ing to Fitch, originators will find themselves with more "burden of proof." Freddie's Q2 Numbers Reveal Refinancing Details Recent findings demonstrate that 81 percent of refinanced mortgages in the U.S. either upheld or slashed debt during the second quarter. who refinanced their first-lien home mortgage either maintained the same loan amount or lowered their principal balance in the year's second quarter. Of these borrowers, 59 percent maintained about the same Freddie Mac's report showed that 81 percent of homeowners reddie Mac released the results of its second-quarter refinance analysis recently, revealing that homeowners who refinance continue to strengthen their housing situations. gage was about 1.5 percentage points, translating into interest rate savings of about 28 percent—the largest percent reduction recorded in the GSE's 27 years of analysis. The net dollars of home equity converted to cash as part of a loan amount (the highest share ever recorded), while 23 percent reduced their principal balance by paying in additional money at the closing table. The median interest rate reduction for a 30-year fixed-rate mort- refinance (adjusted for consumer-price inflation) also fell, drop- ping to its lowest level in 17 years. In the second quarter, an estimated $5 billion in net home equity was cashed out during the refinance of conventional prime-credit home mortgages, a large decrease from the peak volume of $84 billion during Q2 2006. Freddie Mac VP and chief economist Frank Nothaft attrib- uted the increased refinance volume to enhancements created in HARP 2.0. "The enhancements to HARP announced in October, such as removing the maximum loan-to-value limit, resulted in additional refinance volume during the second quarter," said Nothaft. "HARP loans were about one-third of Freddie Mac's refinance fundings during the second quarter, the highest share since HARP's inception." Property-value change and loan age varied between loans refinanced with HARP and other refinances. The median property value depreciation for HARP-refinanced loans during the second quarter was 34 percent, while the prior loan had a median age of about 5.5 years. Other loans refinanced during the same period had a median property-value decline of 2 percent over a median prior-loan age of about four years. THE M REPORT | 61 ORIGINATION SERVICING ANALYTICS SECONDARY MARKET