Changes to Fannie Mae’s and Freddie Mac’s representation and warranties framework are intended to increase home lending by primary lenders.
The pair of government-controlled enterprises said Wednesday that they have issued a uniform framework for representations and warranties remedies.
The changes to their repurchase policies were made at the direction of their regulator and conservator, the Federal Housing Finance Agency.
Policy changes reflect feedback from a working group of lenders.
The improvements are designed to provide additional clarity and certainty that will help mortgage bankers expand access to credit.
“The remedies framework is specifically related to corrections of identified origination defects, and available repurchase alternatives,” Fannie stated in
Selling Guide Announcement SEL-2015-11. “This framework provides clarity on the process followed in categorizing origination defects, lender corrections of such defects, and available remedies. In addition, it provides more transparency regarding Fannie Mae’s discretion on loan-level decisions when reviewing a loan during a quality control review.”
The Washington-based company noted that loans found to be defective after a full-file quality review will be classified in three categories.
The first category, “findings,” won’t require
a correction or a remedy from the lender.
Loans in a second category, “price-adjusted loans,”
require the lender to pay the applicable loan-level price adjustment fee that should have been paid when the loan was purchased or securitized.
Mortgages with the categorization of “significant defect” will require a repurchase, though an alternative might be offered.
McLean, Virginia-based Freddie detailed its revised policies in Bulletin 2015-17.
The new remedies framework impacts loans
delivered into mortgage-backed securities with pool issue dates on and after Jan. 1, 2016.
