EverBank Financial Corp. and Florida Capital Group were among 113 top-tier bank holding companies in the U.S. that reported reserves for representations and warranties relating to residential mortgages sold on the secondary market in the third quarter, according to data from SNL Financial LC.
EverBank (NYSE: EVER) reported reserving $31 million, which was the 22nd highest of all the banks on the list. Florida Capital Group, which is the holding company for Florida Capital Bank, reported reserving $1.4 million.
Banks make customary representations and warranties to purchasers on the secondary market about the characteristics of the loans they are selling. If a defect in the loan origination process is identified the bank may be required to repurchase the loan or indemnify the purchaser for losses it sustained on the loan, and the bank uses the reserves to do that.
Banks first reported reserves for representations and warranties in the second quarter, but the numbers were released to the public for the first time in the third quarter. Bank regulators are still keeping confidential the breakout between reserves related to government-sponsored enterprises versus other parties, such as private investors and bond insurers, according to SNL.
Read more on the reserves report from SNL Financial here.
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