Fannie Mae CEO Timothy Mayopoulos said the government-sponsored enterprise will soon begin offering a 97% loan-to-value mortgage.
Speaking at the Mortgage Bankers Association Annual Convention & Expo, Mayopoulous said the government-sponsored enterprise is working “closely” with the Federal Housing Finance Agency to offer this product to all Fannie associates.
He said increased underwriting quality and improving representations and warranties will allow Fannie to buy these loans.
"We now we can safely and responsibility do these loans…we reduced the layering of risk," Mayopoulos said.
Fannie Mae does not lend mortgages, but rather securitizes the loans into the secondary mortgage markets.
“Under our new rep and warrant framework we are reviewing more loans closer to delivery," Mayopoulos said.
Mayopoulos said his firm repurchased only 8,200 out of 2.7 million recent loans.
And when Fannie gives lenders time to correct any outstanding issues, a buyback is unnecessary in most circumstances.
"At Fannie Mae we are focused on serving you," he told the crowd of mortgage bankers, "and looking forward to serving you in the future."
The announcement builds upon FHFA Director Mel Watt's speech from earlier in the day on Monday, when said that the FHFA was clarifying the Representations and Warranty Framework to help reduce repurchases.