Reuters
August 20, 2009 - 12:00 a.m. EST

(Reuters) - Flagstar Bancorp Inc (FBC.N), one of the largest savings and loans based in the U.S. Midwest, may have to sell some of its $658 million of mortgage-collection contracts at a loss, Bloomberg reported.

Over the past year, MatlinPatterson Global Advisers LLC, a private equity fund, had pumped $350 million into the Troy, Michigan-based thrift for a majority stake.

Fannie Mae (FNM.N), the largest provider of U.S. home mortgage funding, wanted late or defaulted loans at Flagstar to be serviced by specialists, the news agency said quoting people briefed on the matter.

Flagstar could not be reached for comments by Reuters when contacted before regular business hours.

Fannie Mae and rival Freddie Mac (FRE.N) are linchpins of President Barack Obama's housing rescue program, which aims to refinance or modify existing loans for up to 9 million Americans.

But these commitments come at a cost, in part since the companies must pull the troubled loans from mortgage securities and recognize a loss.

Flagstar said earlier this month the government-sponsored enterprises had developed a number of programs and instituted a number of requirements on servicers in an effort to limit foreclosures and to minimize losses on loans that they guarantee or own.

"These additional programs and requirements may increase operating expenses or otherwise change the costs associated with servicing loans for others, which may result in lower margins or an impairment in the expected value of our mortgage servicing rights," Flagstar had said in the 'Risk Factors' section of a regulatory filing.

Flagstar shares, which traded close to $5 last September, closed at 73 cents Tuesday on the New York Stock Exchange. The shares have almost doubled since hitting a 52-week low of 40 cents on Nov. 21 last year. (Reporting by Anurag Kotoky in Bangalore; Editing by Gopakumar Warrier)