As home mortgage loans continue to go bad at an increasing rate, lenders are getting more and more of these loans bounced back at them. The mortgage giants, Fannie Mae and Freddie Mac are sticking lenders with defective underwritten loans. This is resulting in greater losses for lenders in their loan loss reserves and setbacks for banks that are aiming to avoid the downturn in the housing market.

Many of the major lenders that sell mortgages to Fannie Mae and Freddie Mac are going to have to buy back these defective loans at a loss. That means lenders like Wells Fargo & Col., J.P. Morgan Chase & Co., Citigroup Inc., and Bank of America Corp., which is some of the top home mortgage lenders in the country, could be taking sizable hits because of the large amounts of souring home loans. Fannie Mae and Freddie Mac intend to hold lenders accountable for what they determine to be underwritten loans that were done improperly. This would leave banks responsible for more than the mortgages they hold on their own books already.

As an example of how much is actually at stake here; around $2.7 billion of single-family mortgage loans were bounced back by Freddi Mac just through September 30, 2009. That is more than twice the amount that was put back in the previous year. Experts expect these numbers to remain high through 2010. With the figures expected to remain high, billions of dollars are at stake and lenders are likely going to be stuck with most of the bill.

Lenders will be responsible for what found to be improperly underwritten home loans because Fannie Mae and Freddie Mac do not deal directly with consumers trying to get a loan, the instead, either buy or guarantee the home loans from lenders. Therefore, if a lender did not make sure that their home loans were properly underwritten, Freddie Mac and Fannie Mae should not be responsible for paying for the lenders mistakes. In actuality, Fannie Mae and Freddie Mac are government controlled and funded companies, so if they were responsible for the soured loans, the tax payers would be paying for the lenders mistakes.

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