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Banks and mortgage lenders may have received too much relief from loan buybacks, putting taxpayers at greater risk for losses, according to a Federal Housing Finance Agency inspector general's report.
September 17 -
The government-sponsored enterprises just went a long way toward encouraging lenders to make more loans to borrowers with lower credit scores.
May 13
WASHINGTON Fannie Mae and Freddie Mac are expected to announce new products Monday that are designed to make it easier for borrowers to get mortgages, addressing a persistent criticism that credit is too tight.
An announcement is widely expected to come in the afternoon when Mel Watt, the director of the Federal Housing Finance Agency, speaks at the Mortgage Bankers Association's annual conference in Las Vegas. The regulator of Fannie and Freddie is likely to discuss products that will allow borrowers to qualify for a conforming loan with a lower downpayment, as well changes to representation and warranty policies that will give lenders more clarity with regard to potential loan buybacks.
The MBA has been calling for a return to a 97% loan-to-value mortgage, and hoping that is the direction Fannie and Freddie are headed.
"We will applaud that," said David Stevens, the head of the MBA, in an interview on Thursday.
He noted his members will also be looking at the pricing of these loans, particularly the loan level price adjustments that the government-sponsored enterprises charge, which are particularly steep for borrowers with low credit scores and low downpayments.
Less clear is how FHFA is planning to adjust the GSEs' representation and warranty contracts, which were changed most recently in May.
"While we are unsure of the FHFA's next step to further clarify lender liability, we expect FHFA to expand its R&W framework by including a clearer dispute resolution process," according to Isaac Boltansky, an analyst for Compass Point.
Boltansky also expects FHFA to provide clearer guidance with respect to loan defects that can prompt loan buybacks, which are also called putbacks.
Jaret Seiberg, an analyst with Guggenheim Partners, wrote Friday that he also expects Watt to address putbacks.
"Lenders believe that Fannie and Freddie are putting back loans that defaulted for reasons that had nothing to do with initial underwriting," Seiberg wrote. "This fear over future putbacks has caused lenders to keep underwriting standards tight, as they worry they might retain the credit risk if the loan goes bad."
Stevens said the big question is whether the "new rep and warrants give lenders the confidence" to originate loans for borrowers with lower credit scores, Stevens said.
