Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac have eased policies for mortgage lenders. The two mortgage giants issued new guidelines explaining the remedies lenders will be accountable for offering should errors be identified in loans they offer to the firms. It is done in order to convince the lenders to extend mortgage access to riskier borrowers.
The details
Federal National and Freddie Mac don’t make loans, but they purchase mortgages that fulfill certain requirements. They wrap these mortgages into securities and offer guarantees to deal with mortgages default. After the financial crisis, the two companies discovered numerous mortgages that contained errors, forcing them to ask lenders to purchase back the loans.
This made the lenders bristle stating that the punishment was too severe for the mistakes committed. As a result, they hesitated from offering loans to borrowers with poor credit record, even if such borrowers qualified for Freddie and Fannie-backed mortgages.
The measures
To broaden mortgage access and resolve lenders’ concerns, Freddie Mac and Federal National and the FHFA have worked together with lenders to detail clearly the aftermath they have to deal with after making errors. Last fall, the companies made a deal with lenders on the types of errors they would be answerable for years after offering a mortgage.
This week, the two companies stated that rather than wanting lenders to repurchase loans with trivial defects, it would necessitate them to pay Freddie or Federal National what would have been compensated to the firms had the details been precise.
Andrew Bon Salle, the Executive VP of Federal National, reported that lenders always reiterated their concerns related to repurchase, and the new moves will relieve those issues. The new changes will also bring additional clarity to the lending community. In last trading session, the stock price of Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) gained more 0.83% to close at $2.44.
