The Mortgage Bankers Association (MBA) is willing to back a GSE-related refinancing bill introduced by Sen. Al Franken, D., Minn., but wants assurances that the industry will no longer be hit with buyback requests on loans that are several years old.

In a new letter, MBA chief Dave Stevens said the trade group supports Franken's bill, but wants modifications made to it where the Federal Housing Finance Agency (FHFA) would “set clear, consistent and transparent GSE loan repurchase request procedures.”

Stevens argues that FHFA should “consider setting a clear limit on the duration of an originator's repurchase obligation following the origination date.”

As reported by ASR sister publication National Mortgage News several times, Fannie Mae and Freddie Mac in some cases are asking for buybacks on loans that are more than three years old – and in some instances have requested seller/servicers to repurchase performing mortgages that were later found to have underwriting defects.

Buybacks have cost the mortgage industry tens of billions of dollars over the past three years. “Some of these involved loans dating back to 2003,” one trade group official told NMN.
He added: “The buyback issue is not going away.”

Franken's bill is called The Helping Homeowners Refinance Act and among other things would prevent the GSEs from creating disincentives for homeowners seeking to refinance. Its overall goal is to streamline the refi process, especially for borrowers with reduced equity.

In other GSE news, Fannie Mae chief economist Douglas Duncan said that it is better to address the future of the GSEs now rather than wait for stability in the market. This is because if it is done at that time, it would reintroduce instability. He made this remarks at the Regional Conference of the MBA in Atlantic City.

“There is no single silver bullet” that will make everyone happy, Duncan argued, but any solution needs to be related to what the policy objectives are, he said.

There is a consensus in Washington that securitization must be part of the solution. But there is less consensus regarding if the 30-year fixed rate prepayable mortgage should be included, he said.

Duncan noted that the bulk of Americans are “culturally attuned” to the concept of a 30-year fixed-rate mortgage.

Those who develop the solution need to decide what institutions will best support those loan structures, he said.

A discussion about the future of the Federal Housing Administration program needs to take place at the same time, including the government's overall role in the secondary market.

While some type of secondary market mechanism needs to be carried over from the GSEs, there quite likely will be the “extinguishment” of the Fannie Mae and Freddie Mac names, Duncan said.


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