As readers of HousingWire know, Federal Housing Finance Agency Director Mel Watt has been working towards a plan to open what many see as underwriting standards that are too restrictive.
Now, the Wall Street Journal is reporting that the plan may be close to being a reality.
Mortgage giants Fannie Mae and Freddie Mac , their regulator and lenders are close to an agreement that could greatly expand mortgage credit while helping lenders protect themselves from charges of making bad loans, according to people familiar with the matter.
Fannie Mae and Freddie Mac have recouped tens of billions of dollars in penalties from lenders in recent years over claims that the lenders made underwriting mistakes on loans they sold to the mortgage giants. Lenders have blamed those penalties for tight credit conditions and for prompting them to make loans only to borrowers with near-pristine credit.
If the agreement is completed, lenders may be more willing to lend to borrowers with lower credit scores and smaller down payments.
Back in August, Watt made his position on opening the credit boxes clear in his exclusive interview with HousingWire.
“A ding on the credit score, a lost down payment, there are multiple reasons we think demand is down,” he said. “It’s a lack of confidence that housing has the same place in the pecking order of the American dream.
“Now that we are getting lenders to remove some of the credit overlays, and we’ve been satisfied on some of our rep and warrants concerns, it is now our job to go out there and grow homeownership in the country,” Watt said.