A shift by the federal regulator of Fannie Mae and Freddie Mac could soon make getting a mortgage loan easier by giving lenders more leeway before the mortgage giants demand that they repurchase loans.
The majority of the homes on the Texas coast are under $400k and this will help the region’s pent up demand for ownership that has been limited by difficulties getting financing.
Mel Wat, head of the Federal Housing Finance Agency, said he wants to address uncertainties surrounding the “representation and warranty” standards that can trigger repurchase demands.
- Going forward, new borrowers will be allowed to miss two payments during the first three years after taking out a mortgage without triggering a repurchase demand from Fannie and Freddie.
- The mortgage giants will also not automatically demand that lenders repurchase loans if a loan’s primary mortgage insurance is rescinded.
Those moves could embolden lenders to approve mortgages to borrowers who meet all of Fannie and Freddie’s other underwriting requirements, but who previously might have seemed to pose too great a repurchase risk.
The Department of Housing and Urban Development outlined similar steps the Federal Housing Administration is taking to expand access to credit for underserved borrowers.
The average credit score on loans purchased by Fannie and Freddie is 752, FHA said, and there are 13 million people with credit scores ranging from 580 to 680.
“Shutting these consumers out of the market hurts American families and undermines our efforts to build more stable communities, create pathways to the middle class, and increase homeownership opportunities for minority and low-wealth borrowers.
A healthy mortgage market serves all qualified borrowers. FHA is committed to finding ways to responsibly increase access for underserved borrowers.”
The FHA’s “Blueprint for Access” outlines steps the agency expects to take in coming months, including the establishment of “clear rules of the road” to help lenders quantify the risk of making a mortgage loan.
- Fannie and Freddie are Back and Ready for New Mortgages Business (treasplc.com)
- The Government Just Made It Easier To Buy A Home (huffingtonpost.com)
- New Policies Could Make Mortgages Easier To Get (dailyfinance.com)