Today the Federal Housing Finance Agency (FHFA) launched a new representation and warrant framework for conventional loans sold or delivered on or after January 1, 2013.

The FHFA announcement stated that lenders will be relieved of certain repurchase obligations for loans that meet specific payment requirements. This includes rep and warranty relief for loans with 36-months of straight and timely payments.

Meanwhile, the agency said that the Home Affordable Refinance Program (HARP) loans will be eligible for rep and warranty relief after an acceptable payment history of 12 months after the acquisition date.

The regulator also stated that data regarding exclusions for rep and warranty relief, such as violations of state, federal and local laws and regulations will be detailed. Fannie Mae and Freddie Mac will still make available for lenders a range of tools to assist in improving loan quality.

Analysts cited FHFA Acting Director Edward DeMarco’s speech last night to the American Mortgage Conference specifically noted that “by concentrating loan quality review at the time a loan goes bad, the problems have been harder to correct and the losses have been greater than what may have occurred had the reviews been focused at the time of sale.”

Analysts said that the details are probably going to be in upcoming announcements directly from Fannie and Freddie. These will show how much certainty the new framework brings to originators and can reverse the frictions in current origination and refinancing processes. Analysts said that the message is clear: Mortgage banking will return back to the basics of underwriting.

Trade groups have also issued their reaction. For instance, David Stevens, president and CEO of the Mortgage Bankers Association (MBA), issued a statement today reacting to the FHFA announcement.

“We welcome today’s announcement as a huge step that helps bring more certainty for lenders as they attempt to offer affordable mortgage credit to more qualified borrowers and advance the housing recovery," Stevens said. "We have been working with Acting Director DeMarco on this very issue for several years, and the plan outlined today should give lenders the confidence they need to help more qualified borrowers."

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