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Fannie, Freddie and FHLB news. Coverage of government sponsored enterprise regulation, operations and litigation.


Fannie Triples Repurchase Response Time

Bulletin outlines remedies, requirements on repurchases

July 1, 2011

By MortgageDaily.com staff


Fannie Mae has tripled the amount of time that sellers have to appeal repurchase demands.

Currently, the secondary lender allows up to one month to respond to repurchase demands.

But in Announcement SVC-2011-12, the Washington, D.C.-based firm said it is temporarily extending the amount of time to 90 days.

The move was made because of "current and unprecedented market conditions."

"This temporary accommodation for completion of repurchase requests will also provide lenders with a timeline of 90 days in order to submit all documentation needed to substantiate a formal appeal to a Fannie Mae repurchase request," the bulletin stated.

The expanded turnaround requirement will remain in effect until June 30, 2012.

However, Fannie said that the temporary change is subject to review and adjustment at any time at the sole discretion of the government-controlled company.

"Loans that are four or more consecutive monthly payments delinquent may be repurchased from the MBS pool," the bulletin stated. "If the loan remains in an MBS pool, this temporary accommodation will not apply."

Until mid-2012, lenders have 90 days to appeal a repurchase request. After June 30, 2012, the appeal time drops back down to 30 days.

Supporting documentation must be submitted at the time of the appeal and can't be promised for a later date.

"If no written appeal is received within the 90-day period or within such other time frame as specified in writing by Fannie Mae, it will be assumed that the lender does not contest the repurchase and the repurchase funds are due Fannie Mae," the bulletin stated. "Thereafter, the appeal process will be unavailable to the lender for that particular repurchase request."

As long as no other deficiencies exist, Fannie said it will withdraw the repurchase request with proof that the mortgage insurance coverage is re-established.

But once Fannie denies an appeal, the lender has just 15 days to repurchase the loan or submit a "make-whole" payment.

The government-controlled enterprise noted that previously repurchased loans can be submitted for re-delivery as loan as the condition making the loan ineligible has been cured and the loan meets Fannie's guidelines. Terms of re-delivery are established on a case-by-case basis.

Also, qualified loans repurchased from other investors are eligible for delivery if the loan was delivered to the other investor in error. But any other repurchased loans are ineligible for delivery.

Failure to meet a repurchase demand could result in sanctions against the lender like requiring the posting of collateral,
denying transfer of servicing requests and pledged servicing requests, or imposing limits on trading desk transactions. Other possible sanctions include compensatory fees, the modification or suspension of the selling agreement or the termination of a lender.

If repurchase requests exceed 25 percent of a lender's adjusted net worth, then the lender has 30 days to cure such a breach.

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