The Federal Housing Finance Agency (FHFA) wants to make GSE loan buyback policies more transparent, eliminating uncertainty in the secondary market while encouraging lenders to fund new loans.
The agency plans to clearly define what conditions will trigger a buy-back request from Fannie Mae and Freddie Mac. However, such clarifications likely will not reduce the buyback scourge any time soon.
Over the past five years Fannie and Freddie have pressed lenders to repurchase billions of dollars of poorly underwritten, defaulted loans or compensate them for losses. Requests have even been made on performing mortgages, angering a large number of seller/servicers.
The Federal Reserve Board recently cited buybacks as being a reason for tight credit conditions and the slow recovery of the housing market.
“FHFA and the Enterprises will respond to this market concern by aligning and making policies for representations and warranties more transparent,” the GSE regulator says in a new strategic plan outlining its management of Fannie and Freddie for the next few years.
Released Tuesday afternoon, the strategic plan notes that enforcing buyback claims ensures that the GSEs are “compensated for losses that are the legal responsibility” of seller/servicers.
In the same document, FHFA says its ongoing 'Uniform Mortgage Data Program' will provide reliable and timely loan-level information that will reduce representation and warranty risk through upfront monitoring.