The ultimate goal is to create an atmosphere where lenders expand their mortgage access to riskier borrowers.
To allay lenders’ concerns and broaden mortgage access, Fannie, Freddie and their federal regulator have worked over the past few years with lenders to define more clearly the repercussions they would suffer for making errors, according to The Wall Street Journal.
Following the financial crisis the mortgage-finance giants said that they had found billions of dollars of mortgages that contained errors – which in turn prompted mortgage companies to demand that lenders buy back the loans.
Part of that legacy from the 2008 financial crisis was the conviction of Countrywide executive Rebecca Mairone for committing fraud and knowingly selling dangerous mortgagees, who was ordered to pay a $1 million penalty – a decision she is currently appealing.
This created an atmosphere where lenders stepped away from lending to borrowers with weaker credit – despite the fact that they did indeed qualify for a mortgage from Fannie Mae and Freddie Mac.
It wasn’t until last fall that companies reached an agreement on what kinds of errors they’d still be liable for years after the mortgage had been made.
Fannie Mae and Freddie Mac released new guidelines detailing the remedies lenders will be responsible for providing should errors be found in loans they sell to the companies.