Fannie Mae, Freddie Mac Update Rep/Warranties Frameworks

Fannie Mae and Freddie Mac announced updates to their representation and warranty framework that governs the rights and responsibilities lenders face when selling loans to the GSEs.  

The Fannie Mae announcement (https://www.fanniemae.com/content/announcement/sel1511.pdf), effective Jan. 1, provides a list of potential alternatives to repurchase that it could offer in the event of underwriting defects. In addition, Fannie Mae provided specific guidance on what kinds of loan defects could lead to a repurchase request or an alternative remedy.   

“Lenders consistently tell us that concerns about repurchases limit their willingness to lend, so we’re trying to put those concerns to rest,” said Andrew Bon Salle, executive vice president of single-family business with Fannie Mae. “By pursuing repurchase alternatives and providing clarity on significant defects we aim to help lenders serve the market confidently, efficiently and profitably.”  

Freddie Mac’s changes (http://www.freddiemac.com/singlefamily/guide/bulletins/pdf/bll1517.pdf) are also effective Jan. 1. Freddie Mac Senior Vice President and Single-Family Credit Risk Officer Donna Corley said the enhanced framework “is intended to provide more clarity and transparency to lenders who do business with Freddie Mac on identifying and correcting origination defects, and the remedies that are available to them.”  

Mortgage Bankers Association President and CEO David Stevens said these changes are the result of months of outreach and dialogue among the Federal Housing Finance Agency, Fannie Mae, Freddie Mac and MBA, and are designed to provide lenders with greater clarity and transparency into the enforcement process for loan-level origination defects.  

“Of particular note, key terms are now clearly defined and lenders are afforded the right to correct loan-level defects before facing remedies,” Stevens said. “Additionally, the lenders will have greater access to repurchase alternatives as well as representation and warranty sunset relief. Real progress has been made, however, there is still more work to be done. Looking ahead, we will continue to provide input to the GSEs and FHFA on elements of the Seller/Servicer Guides. We are particularly encouraged by progress taken to date to develop the independent dispute resolution program, a step we consider critical to the new representation and warranty framework.”