FHFA, GSEs Announce Independent Dispute Resolution Program

The Federal Housing Finance Agency announced that Fannie Mae and Freddie Mac implemented an independent dispute resolution process for resolving repurchase disputes.  

The program enables lenders to submit unresolved loan level disputes to a neutral third party arbitrator after the appeal and escalation processes have been exhausted. It was developed cooperatively by Fannie Mae, Freddie Mac and FHFA with input and support from the Mortgage Bankers Association and other groups in the mortgage lending industry.  

“The IDR process provides the Enterprises and lenders a mechanism for resolving a repurchase dispute and avoiding the possibility that a dispute might languish unresolved for an extended period of time as has often occurred in the past,” said FHFA Director Melvin Watt. “IDR is the final part of the Representation and Warranty Framework which, taken as a whole, will increase clarity for lenders and will ultimately increase access to mortgages for creditworthy borrowers.”  

MBA  issued a statement commending FHFA and the GSEs. MBA President and CEO David Stevens, CMB, called the IDR the “capstone of the representation and warrant framework” of MBA’s work with FHFA and the GSEs for the past four years.  

“FHFA, Fannie Mae and Freddie Mac should be commended for their work over the last four years on the representation and warrant framework,” Stevens said. “The independent dispute resolution process is an important final piece to this effort. In its totality, the representation and warranty framework will provide much needed certainty and transparency for lenders of all sizes and help broaden access to credit for borrowers.”  

FHFA said the Representation and Warranty Framework has been a priority outlined in the conservatorship Scorecards since 2012. The IDR process is available on loans delivered to Fannie Mae and Freddie Mac on or after Jan. 1. 

Specific details will be published in the Enterprises’ selling guides in the coming months.   

The Fannie Mae announcement can be accessed at https://www.fanniemae.com/content/announcement/sel1601.pdf.  

The Freddie Mac Bulletin can be accessed at http://www.freddiemac.com/singlefamily/guide/bulletins/pdf/bll1601.pdf.

 “Today’s announcement finishes a four-year process to give our lenders a simpler, clearer and more certain representations and warranties framework for originations,” said Donna Corley, Freddie Mac Senior Vice President and Division Chief Risk Officer of Single-Family. “This process empowers lenders to refer these disputes to a neutral third party for a final decision.”