On Tuesday, September 11, 2012, the Federal Housing Finance Agency announced that Fannie Mae and Freddie Mac are starting a new representation and warranty framework for conventional loans sold or delivered on or after January 1, 2013. The new initiative, according to the FHFA, is aimed to clarify lenders’ repurchase exposure and liability on future loan deliveries. Under the framework:
• Lenders will be relieved of certain repurchase obligations for loans that meet specific payment requirements, for example, rep and warranty relief will be provided for loans with 36-months of consecutive, on-time payments;
• HARP loans will be eligible for rep and warranty relief after an acceptable payment history of 12 months after the date of acquisition;
• Information about exclusions for rep and warranty relief, such as violations of state, federal and local laws and regulations will be detailed; and
• Fannie Mae and Freddie Mac will continue to make available to lender a range of tools to help improve loan quality.
The framework also directs Fannie Mae and Freddie Mac to:
• Conduct quality control reviews earlier in the loan process, generally between 30-120 days after the loan purchase;
• Establish consistent timelines for lenders to submit requested loan files for review;
• Evaluate loan files on a more comprehensive basis to ensure a focus on identifying significant deficiencies;
• Leverage data from the tools currently used by Fannie Mae and Freddie Mac to enable earlier identification of potentially defective loans; and
• Make available more transparent appeals processes for lenders to appeal repurchase requests.
For more information on the new framework, click here for FHFA’s news release, which contains links to Fannie Mae Selling Guide Announcement and Lender Letter, as well as to Freddie Mac’s Bulletin and Industry Letter.