FHFA Authorizes GSEs to Support Additional Liquidity in Secondary Mortgage Market; Provide Flexibility in Appraisals, Employment Verifications

The Federal Housing Finance Agency yesterday issued two directives to Fannie Mae and Freddie Mac—one to enter into additional dollar roll transactions to provide mortgage-backed securities investors with short-term financing of their positions; and the other to provide alternative flexibilities to satisfy appraisal requirements and employment verification requirements.

FHFA said the directives (https://www.fhfa.gov//Media/PublicAffairs/Pages/FHFA-Authorizes-the-Enterprises-to-Support-Additional-Liquidity-in-the-Secondary-Mortgage-Market.aspx) are intended to “facilitate liquidity in the mortgage market during the coronavirus national emergency.”

Dollar roll transactions provide mortgage-backed securities investors with short-term financing of their positions, providing liquidity to these investors. FHFA said eligible collateral is limited to agency mortgage-backed securities and the transactions must be undertaken via an auction or similar mechanism to ensure that they occur at a fair market price.

By providing “alternative flexibilities” to satisfy appraisal requirements and employment verification requirements through May 17—an issue that the Mortgage Bankers Association has emphasized with FHFA in recent discussions—FHFA said it would allow for homes to be bought, sold and refinanced in the coronavirus environment.

FHFA said in the event lenders cannot obtain verbal verification of the borrower’s employment before loan closing, the Enterprises will allow lenders to obtain verification via an e-mail from the employer, a recent year-to-date paystub from the borrower, or a bank statement showing a recent payroll deposit.

“Lenders should continue to utilize sound underwriting judgment to ensure these alternatives are appropriate to the borrower’s circumstances,” FHFA said.

The directive can be found at https://www.fhfa.gov//Media/PublicAffairs/Pages/FHFA-Directs-Enterprises-to-Grant-Flexibilities-for-Appraisal-and-Employment-Verifications.aspx.

FHFA said it and the GSEs are monitoring the coronavirus national emergency’s effect on the housing finance market and will continue to update our policies when necessary.

A link to the FHFA Webpage on Coronavirus Actions can be found at https://www.fhfa.gov/Homeownersbuyer/MortgageAssistance/Pages/Coronavirus-Assistance-Information.aspx.