SunTrust Banks' top officer said Tuesday mortgage repurchase costs in fourth quarter could be “well above” those reported in prior quarters, as soured loans made during the housing boom continue to dog the Atlanta-based regional lender.
Banks have come under pressure from investors to buy back soured mortgage loans. Investors allege the loans, packaged together into investment securities, didn’t meet the terms of the investment agreements, resulting in losses.
“This is a frustrating process and it is increasingly sort of difficult to predict,” SunTrust President and CEO William Rogers told analysts during an investor conference in New York.
Rogers said the repurchase demands are largely from loans made from late 2006 to early 2008, the height of the mortgage frenzy. Rogers said he believes the bank's repurchase demands "have crested."
Mortgage repurchase demands have been trending up for SunTrust the past few quarters. SunTrust had repurchase demands from investors of $440 million in third quarter, up from $348 million in second quarter and $263 million in third quarter a year ago.
Investors have made $4.4 billion in cumulative requests from loans issued since 2005, resulting in losses to the bank of $1 billion, according to SunTrust’s third quarter earnings presentation.
“Unfortunately the losses relating to the housing market continue to have an impact on bank earnings,” said Terry McEvoy, a bank analyst with Oppenheimer & Co. in New York.
Shares of SunTrust dropped more than 6 percent Tuesday.
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