Nov 20 (Reuters) - Fannie Mae and Freddie Mac said on Thursday they have revised their representation and warranty framework in an attempt to reduce concerns among lenders about the risk on buying back loans sold to the two federal mortgage finance agencies.
The mortgage industry and some analysts have blamed this “repurchase” risk for making lenders reluctant to lend more, thereby putting a drag on the U.S. housing recovery.
“There are qualified borrowers who are not being served in today’s market. With this clarity, lenders should have greater confidence in lending to Fannie Mae’s full credit standards and making mortgages available to more borrowers,” Andrew Bon Salle, Fannie Mae’s executive vice president of single-family underwriting, pricing and capital markets, said in a statement.
In the aftermath of the housing bust, Fannie and Freddie could require lenders and servicers to buy back a defaulted mortgage if a problem is found in the loan documents or other violation of a representation or warranty occurred. A repurchase may occur if a breach occurs regardless whether the related loan is in default.
“Addressing these concerns by providing tighter definitions and clarity should encourage Sellers to serve a broader range of qualified borrowers,” said Dave Lowman, Freddie Mac’s executive vice president of single-family business in a statement. (Reporting by Richard Leong, editing by G Crosse)