Analyst: First Horizon exposure in FHFA lawsuit is less than $125M, worst-case

Wunderlich Securities Inc. bank analyst Kevin Reynolds published a research report Monday related to the lawsuit against First Horizon National Corp. that was filed Sept. 2.

The Federal Housing Finance Agency sued 17 banks, including Memphis-based First Horizon, which is the parent company of First Tennessee Bank. The suit against FHN was over $883 million in residential mortgage-backed securities issued to Fannie Mae and Freddie Mac in connection with five First Horizon-sponsored and First Horizon-underwritten securitizations.

But only $379 million of that amount is still outstanding, Reynolds noted.

“At present, the outstanding remaining balance on these MBS is just $379 million, of which $300 million is performing and $79 million is 90 days or more past due,” Reynolds wrote.

“In our opinion, the worst-case scenario for FHN in this lawsuit is a ‘cost’ of less than $125 million, which includes both the $34 million in cumulative losses to Fannie and Freddie thus far plus a write-down of the $79 million in nonperforming balances, if the company had to repurchase the remaining balance of these five tranches.”

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