Updated guidelines issued by Fannie Mae and Freddie Mac are intended to provide lenders with more certainty that they won’t face repurchase demands down the road.
Fannie and Freddie previously issued updates that relieved lenders from repurchase liability after 36 months as long as no more than two payments were 30 days past due and the 36th payment was current.
Now, the Federal Housing Finance Agency has directed the pair of secondary lenders to make significant enhancements to their selling representation and warranty framework.
So the government-controlled enterprises Thursday announced changes tied to misstatements, misrepresentations, omissions and data inaccuracies.
Washington-based Fannie outlined the updates in Selling Guide Announcement SEL-2014-14, while McLean, Va.-based Freddie discussed the updates in Bulletin 2014-21.
In order to be eligible for relief, there cannot be a pattern of misstatements, misrepresentations and omissions that would have caused the loan not to be bought. At least three loans from the same seller is considered a pattern.
If the loan would have been purchased with the correct information, but under different terms, then the loan will be re-priced consistent with the risk.
But no relief will be granted when the seller was aware of, or involved in, fraud.
Relief can be granted from data inaccuracies if fewer than five loans are involved and the Uniform Loan Delivery Dataset doesn’t vary from information in the file. No relief will be given if the correct data in the file would have caused the loan to be denied.
Lenders, however, won’t be relieved on charter matters; when there are data inaccuracies or misstatements, misrepresentations and omissions; there are title problems; there is non-compliance with laws; or there is an issue with mortgage product eligibility.
Unless a repurchase demand has already been issued, impacted loans include those with settlement dates or MBS pool issue dates of Jan. 1, 2013, or later.
“The release of details today by Fannie Mae and Freddie Mac clarifying the definition of life-of-loan exclusions and when they apply is a positive step forward for housing finance,” FHFA Director Melvin L. Watt said in a written statement. “Concerns about when a mortgage loan might be subject to repurchase, along with other market factors, have contributed to increased credit overlays that drive up lending costs and reduce access to credit.”
Mortgage Bankers Association President and Chief Executive Officer David H. Stevens issued a statement applauding the announcements and calling the moves a “significant step toward substantive rep & warrant reform.”
Fannie and Freddie additionally updated their selling guides to provide seller-servicers with more certainty and transparency about how and when they will enforce remedies for compliance with laws violations.
