The Federal Housing Finance Agency (FHFA) is expected to issue loan buyback guidance by late September — or even earlier — that could spell relief for seller/servicers depending on how many caveats are attached to the language.
According to interviews with executives, advisors and related parties, mortgage bankers would be ecstatic if the FHFA issued guidance that would bullet-proof the industry against repurchases on all loans that are current for at least 36 months — with no delinquencies whatsoever, not even 30-day late payments.
“I think 36 months would be very reassuring for lenders,” noted a West Coast-based secondary executive whose firm has seller/servicer approvals pending with both Fannie Mae and Freddie Mac. “But it’s the small print that counts.”
The FHFA, so far, has given little hint about which way it is leaning on the issuance. An agency spokeswoman did not return a telephone call about the matter.
Sources say Fannie Mae has toyed with the idea of no repurchases after 24 months while Freddie has discussed a larger window.
Tim Rood, partner and managing director for The Collingwood Group, noted that the industry is “definitely looking for some sort of ‘sunset’ on the warranty risk. However, the FHFA is not known for its sensitivity to actors not directly involved in its two main objectives: preserving and recovering taxpayer dollars, and foreclosure prevention.”
According to Rood, the agency is “likely to recommend a policy that discourages repurchase review on loans that performed satisfactorily for 36 months, plus or minus, but I doubt there will be a complete and final sunset of risk to the lender.”
But the biggest question is whether whatever is issued would be grandfathered or would only apply to loans funded this year and beyond.
Mortgage bankers have complained vociferously about buybacks ever seen the housing crisis began four years ago with some lenders creating huge loss reserves to cover potential damages.