New Appeals Process for Loan Repurchases

Filed under: Fannie Mae, Freddie Mac

freddie mac2Last week, Fannie Mae and Freddie Mac disclosed an appeals process that will allow an independent arbitrator to resolve any disputes between lenders and the government-sponsored enterprises over loan repurchase demands.

An article in National Mortgage News by Brian Collins explains that this process, which was approved by the Federal Housing Finance Agency (FHFA) and endorsed by the Mortgage Bankers Association, is an effort to provide lenders more certainty that they won’t later face costly repurchase requests if a loan “goes bad.”

FHFA director Mel Watt, in a press release, said, “A final decision by the arbitrator will avoid the possibility that a dispute might languish unresolved for an extended period of time as has often occurred in the past.” Watt added that this “will increase clarity for lenders and will ultimately increase access to mortgages for creditworthy borrowers.”

Collins wrote that the process will be available for whole loans purchased and mortgage loans delivered into mortgage-backed securities pools this year.

David Stevens, president and chief executive of the Mortgage Bankers Association said, “FHFA, Fannie Mae, and Freddie Mac should be commended for their work over the last four years on the representation and warrant framework.”

Stevens added, “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.”

Collins also noted that Andrew Bon Salle, an executive vice president at Fannie Mae, said the GSEs have worked to clarify their policies and guidelines with respect to representations and warranties.

Salle added, “Our intention has been to ensure lenders can lend with confidence knowing that if they originated to Fannie Mae guidelines, their risk of repurchase has been minimized. Many lenders have told us that our efforts are paying off, and that they are more comfortable lending to the full credit box of our guidelines.”

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