Federal Housing Finance AgencyActing Director Ed DeMarco shared a tentative plan on government-sponsored enterprise reform while speaking to the American Mortgage Conference in Raleigh, N.C., on Monday. DeMarco noted the FHFA is drafting a white paper on the topic and plans to release it next month.
In February 2011, the Treasury released its own white paper on reforming the government-sponsored enterprises. That paper offered three options, none of which regulators pursued.
The FHFA is trying to build a flexible mortgage securitization platform that will support a secondary mortgage market when Fannie Mae and Freddie Mac finally reduce their roles in the space. At the AMC, DeMarco gave an indication of what the white paper will look like.
DeMarco's statements show an acting director who remains dedicated to winding down the GSEs, while maintaining a key role in establishing the securitization structure that will eventually support private-label MBS deals ten years from now.
The structure the FHFA proposes for the secondary mortgage market includes recommendations for a new, standardized pooling and servicing agreement and a revamped framework for reps and warranties on all conventional loans sold or delivered after Jan. 1, 2013.
"The objective of the new framework is to clarify lenders’ repurchase exposure and liability on future deliveries. Under this framework, lenders will be relieved of certain repurchase obligations for loans that meet specific payment requirements," DeMarco said.
The proposed plan would relieve repurchase risk on loans that have maintained 36 months of consecutive, on-time payments, DeMarco said. In addition, under the FHFA proposed model, lenders partaking in HARP or other refinancing programs will be eligible for relief after making 12 consecutive months of payments.
"Importantly, in the new representation and warranty framework, the focus of the enterprises’ quality control reviews will be shifted earlier in the loan process, generally between 30 to 120 days after loan purchase," DeMarco said.