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 (NYS: WFC) made 33.9% of all home loans originated in the first quarter of 2012. It's closet competitor was JPMorgan Chase (NYS: JPM) , with 10.9%. Bank of America (NYS: 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.

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Fool contributor John Grgurich but owns no shares of any of the companies mentioned in this column. Follow John's dispatches from the bleeding edge of capitalism on Twitter @TMFGrgurich. The Motley Fool owns shares of Bank of America, JPMorgan Chase, and Wells Fargo. Motley Fool newsletter services have recommended buying shares of Wells Fargo. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

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