That didn't take long.
Merely one day after Federal Housing Finance Agency acting director Ed DeMarco promised a white paper on reform at the government sponsored enterprises, change is already beginning.
The Federal Housing Finance Agency announced Fannie Mae and Freddie Mac are launching a new representation and warranty framework for conventional mortgages sold or delivered on or after Jan. 1, 2013. The new rules do not impact earlier mortgages.
The move is part of a broader program referred to as "seller-servicer contract harmonization."
In a statement DeMarco indicated that taxpayers will be further protected from future losses based on a more conservative approach from the GSEs.
“Ultimately, better quality loan originations and underwriting, along with consistent quality control, help maintain liquidity in the mortgage market while protecting Fannie Mae and Freddie Mac from loans not underwritten to prescribed standards,” said DeMarco said in a statement. “These efforts contribute to a firm foundation for a new, sustainable housing finance system for the future.”
Under the new regime, rep and warranty relief will be provided for loans with 36-months of consecutive, on-time payments. For HARP loans, the time frame is only 12 months.
The FHFA notes quality control will be a stronger focus. The GSE are both currently moving to unify underwriting and compliance protocols into a standard model.
This model should evaluate mortgage data much earlier and much more often. Defects will be noticed quickly, the FHFA states, and loses more likely will be avoided for the GSEs, in these cases.
In exchange, the GSE will create a transparent appeals processes for lenders to appeal repurchase requests.