Repurchase Activity Causes Mortgage Concern

Repurchasing is a term not normally heard in connection with the housing market; some mortgage professionals don’t know what the term stands for. But repurchasing, or buying back a loan due to errors or risks associated with the loan, is now on the rise. Many big name investors are requiring that primary lenders buy back loans that are riddle with errors in information, or loans that are considered high risk. Many of these loans are stated income mortgages, where the homebuyer is allowed to say how much they make without any verification.

Low fico scores, second liens and stated income deals are the three highest incidents of repurchasing in a field where risks are analyzed by numbers only. The uprising of repurchasing activity has analyst wondering if the mortgage industry is about to collapse due to prior loans. Many secondary buyers are refusing to buy out mortgages that are in the high-risk field, making it harder for primary lenders to take on loans. Though the situation is still in early stages, some are starting to watch what the repurchasing market does.