In a speech at the annual Mortgage Bankers Association convention in Las Vegas, Watt said Fannie Mae and Freddie Mac have reached an agreement with lenders that better define bad practices that would trigger penalties for lenders. The move is meant to help ease tight credit standards that have created a drag on the housing market.
“We understand that addressing these concerns in ways that are mutually satisfactory to you,” and Fannie Mae and Freddie Mac are “critical to ensuring that there is liquidity in the housing-finance market and to providing access to credit for borrowers,” Watt told the audience of about 4,000 mortgage professionals
The two mortgage giants will more clearly defining the life-of-loan exclusions, so lenders will know what they are and when they apply to loans that have otherwise obtained repurchase relief.
The exclusions fall into six categories:
1) Misrepresentations, misstatements and omissions
2) Data inaccuracies
3) Charter compliance issues
4) First-lien priority and title matters
5) Legal compliance violations
6) Unacceptable mortgage products.
For loans that have already earned repurchase relief, the GSEs are clarifying that only life-of-loan exclusions can trigger a repurchase under the framework. “This is a straightforward clarification, but one that we believe will reduce confusion and risks to lenders,” said Watt.
Fannie Mae and Freddie Mac will offer details in “coming weeks,” he added.
The clarification is part of a broader push to unlock tight credit after lenders had to repurchase billions of dollars of bad mortgages they sold to Fannie Mae, Freddie Mac and private investors. Currently, Americans are experiencing the tightest credit market in 16 years, which lenders have blamed on penalties.
Click here to read Watt’s full speech.
U.S. Housing and Urban Development Secretary Julian Castro also pledged today to help provide lenders more certainty about when they would face liability for defaults on loans insured by the FHA
“Government must take action by shaping an environment where good lenders and good borrowers can work together without reservation,” Castro said at the conference. “This means creating more certainty for you, which is a top priority at HUD. In the wake of the crisis, we’ve seen a lot of frustration from lenders when it comes to their FHA business”.
Click here to read Castro's full speech.
Federal Housing Finance Agency Director Mel Watt relieved some of the housing finance industry's concerns today with news of the agency’s plan to clarify buyback rules in a bid to ease credit.