How Superstorm Sandy May Help Some of America's Biggest Banks

Reuters is reporting that Fannie Mae and Freddie Mac have granted mortgage servicers the authority to offer those homeowners hardest hit by superstorm Sandy forbearance on their loans. For those banks savvy enough -- and goodhearted enough -- to take the housing giants up on their offer, Sandy's battering of the eastern seaboard may provide them the opportunity to help repair their own battered reputations.

Reputation rehab
Forbearance allows a borrower to suspend or reduce loan payments for a specified period of time. Under existing agreements with its mortgage servicers, Fannie Mae can authorize 90 days of forbearance, and Freddie Mac up to one year. This offer is only good for those homeowners that live in areas declared a federal disaster area by President Obama.  

Wells Fargo (NYSE: WFC  ) made 33.9% of all home loans originated in the first quarter of 2012. It's closet competitor was JPMorgan Chase (NYSE: JPM  ) , with 10.9%. Bank of America (NYSE: BAC  ) came in fourth, with 4.2%. All three of these banks have gotten into hot water, to one degree or another, for their mortgage-related behavior in the run-up to the financial crash. As a result, reputations have suffered.

Taking up Fannie and Freddie on their offers to allow homeowner loan forbearance would be a wise move. Yes, in the short term, revenue and profits will likely take a hit. But in the long term, showing shattered homeowners some kindness and compassion in this worst of times for them may go some ways toward restoring those blighted reputations.

Sandy's silver lining
The world needs good banks, and good bankers to run them. And they're out there. But banker bashing has become a global pastime since the crash, for understandable reasons. This is an opportunity for at least some of America's big banks to begin relegating that pastime to the past.

Thanks for reading and for thinking. While you have B of A on the brain, check out The Motley Fool's new in-depth report on Bank of America. It will give you a thorough detailing B of A's prospects, along with three reasons to buy and three reasons to sell. Just click here for immediate access.


Read/Post Comments (0) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2096192, ~/Articles/ArticleHandler.aspx, 10/20/2014 7:32:41 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement