[Correction: The headline of this article and the body incorrectly indicated that Freddie Mac plans to launch the use of trended credit data and automated underwriting in 2017. The article and headline are now corrected.]
The Federal Housing Finance Agency on Wednesday released a comprehensive report on how Fannie Mae and Freddie Mac performed in 2016, measured against the goals laid out for the government-sponsored enterprises in 2014.
Specifically, the report covers how well Fannie and Freddie achieved the targets set by the GSEs' 2016 scorecard, which was released in late 2015.
As the FHFA notes, there are three main goals for the GSEs, as dictated by the FHFA’s “2014 Strategic Plan for the Conservatorships of Fannie Mae and Freddie Mac.” Those goals are:
- MAINTAIN, in a safe and sound manner, foreclosure prevention activities and credit availability for new and refinanced mortgages to foster liquid, efficient, competitive, and resilient national housing finance markets
- REDUCE taxpayer risk through increasing the role of private capital in the mortgage market
- BUILD a new single-family securitization infrastructure for use by the Enterprises and adaptable for use by other participants in the secondary market in the future
Within each of those main tenets, the GSEs’ 2016 scorecard establishes specific goals.
For example, under the “Maintain” section, the scorecard stated that Fannie and Freddie work to increase access to mortgage credit, prepare for the impending expiration of crisis-era loss mitigation programs, responsibly reduce severely aged delinquent loans and real estate owned properties, and support affordable rental housing and the liquidity of the multifamily finance market in 2016.
The FHFA report shows that both of the GSEs’ made progress in those areas in 2016.
One area highlighted in the report is Fannie Mae launching its “Day 1 Certainty” initiative in September 2016. The initiative enables lenders that use Fannie Mae’s Desktop Underwriter and Collateral Underwriter tools to be shielded from buyback risk from the GSE under certain conditions.
According to the FHFA report, Day 1 Certainty provides representation and warranty relief on the appraised value when the appraised value is within limits set by Collateral Underwriter.
The report states that approximately 60% of appraisals submitted to Fannie Mae are expected to be eligible for this relief.
The report also states that Freddie Mac is working on its own version of Day 1 Certainty, and anticipates launching a similar initiative this year.
The FHFA report also states that the GSEs are continuing to review alternative credit scoring models as options for underwriting.
“FHFA continued to work with the Enterprises to study the costs and benefits of migrating to or implementing additional or alternative credit score models within the Enterprises’ businesses,” the report states. “FHFA and the Enterprises also sought to understand the costs, operational implications, and potential impact on access to credit from the point of view of lenders, investors, trade associations, consumer groups and other industry stakeholders.”
The FHFA said that it will work to conclude its assessment of alternative credit scoring in 2017.
The report also notes Freddie Mac's recent announcement that it plans to begin automating underwriting for borrowers without credit scores.
The FHFA report also updates the GSEs’ risk-sharing efforts, which the FHFA released earlier this week in a separate report.
The report also touches on the GSEs’ progress on working on the single security, the projected billion-dollar joint initiative from Fannie and Freddie to develop a single mortgage-backed security that will be issued by the government-sponsored enterprises.
Last week, the FHFA announced that the full rollout of the single security is being pushed back until the second quarter of 2019.
“In collaboration with Fannie Mae and Freddie Mac, FHFA has made significant progress in meeting our conservatorship objectives,” FHFA Director Mel Watt. “This report underscores our commitment to transparency as we continue to foster liquidity and efficiency in the housing finance markets, reduce risk to taxpayers and build a new mortgage securitization infrastructure, all in a safe and sound manner.”
And that’s just a brief overview of the report. Click here to read the whole thing.