Fannie Mae, Freddie Mac Announce New Rules to Boost Lending

Filed in Housing Finance by on October 8, 2015 0 Comments

houseandcalculatorOn Oct. 7, Fannie Mae and Freddie Mac announced new rules relating to mortgage origination defects and remedies that will provide greater certainty and clarity to mortgage lenders who sell loans to the two housing government sponsored enterprises (GSEs).

Since the meltdown in the mortgage market, lenders and other industry players have expressed significant concern and frustration with the mortgage repurchase policies of both Fannie Mae and Freddie Mac.

Uncertainty regarding what mortgage defects will trigger repurchase requests by the GSEs has caused lenders to add their own credit overlays to mortgage loans sold to the GSEs β€” a key barrier to credit access.

In response to the concerns, Fannie and Freddie have been refining their representations and warranties framework over the past few years. The next phase, origination defects and remedies, expands on those efforts.

The Oct. 7 announcement provides lenders clarity and transparency regarding origination defects and remedies, including alternatives to repurchase, and will help lenders manage risk more effectively.

The policy update formally confirms that lenders have the right to correct loan defects – sometimes through providing additional or missing documentation, or via a pricing adjustment.

By helping to alleviate concerns about having to repurchase loans due to errors that would not lead to a default, these actions by Fannie and Freddie will help spur more mortgage lending.

See the announcements by Fannie Mae and Freddie Mac. For more information, contact Becky Froass at 800-368-5242 x8529.

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