What happens if you don't make your monthly mortgage payment? In some cases, the original lenders are
taking the biggest hits. In typical contracts, mortgage banks agree to buy mortgages back from Wall Street in
the case of a payment default within the first 90 days. H&R Block (owner of Option One Mortgage Corp.) set
aside $219 million for buybacks. Defaults forced Fremont General Corp to buy back more loans totaling $238
million in the 2nd quarter. But Wall Street is hurt as well. A few lenders have refused to buy back loans,
prompting arbitrations and lawsuits. EMC is suing MortgageIT over $70 million in disputed buybacks. Lehman
Brothers Inc. is trying to recoup $20 million on toxic loans bought years ago from Beverly Hills Estates Funding.
Many analysts think that smaller lenders will be hit the hardest, since many are undercapitalized.
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