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Fannie, Freddie Told to Ease Credit Standards

By Randy Kirsch

Mortgage and Lending with Right Trac Financial Group, Inc., NMLS# 2709 NMLS #1012303

January 19, 2015 07:19 AM

Last week it was reported by REUTERS that Mel Watt, Director of the Federal Housing Finance Agency ("FHFA") has instructed Fannie Mae and Freddie Mac to "explore 'alternate' credit score models and the credit history of the loans they support". Watt has stated that expanding credit availability is an sign life away important goal, but also indicated that it must be balanced against the risks associated with loan losses.

As you will recall, Fannie and Freddie have both introduced 97% LTV loan products. They are going to be pursuing other means to make financing available to more home buyers. Among other things, FHFA wants to see Fannie and Freddie, "increase the purchase of loans backed by manufactured housing, as well as ramp up counseling services for buyers trying to obtain a mortgage or in early delinquency". FHFA has also indicated that Fannie and Freddie focus on, "finalizing a new framework to govern when lenders are held liable for sour loans, reducing severely delinquent mortgages and building a common securitization platform".

The FHFA has certainly set lofty goals for the GSEs to accomplish. Whether any of the requested moves will ease credit standards will not be seen for some time down the road and would seem to be of little help in the immediate future.

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George Souto

George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT

Your Connecticut Mortgage Expert

Randy one change I would like to see is for Fannie and Freddie to do away with the Loan Level Price Adjustments. Those additional points are a killer for Borrowers with lower credit scores.

Jan 19, 2015 09:00 AM

Randy Kirsch

Manchester, CT

Joe Petrowsky

Mortgage Consultant, Right Trac Financial Group, Inc. NMLS # 2709 - Manchester, CT

Your Mortgage Consultant for Life

Good morning Randy. We have seen this kind of statement before, one problem, it has not become reality. The problem with this kind of directive, lenders don't want to be put in a position to have to buy mortgages back.

Jan 19, 2015 05:40 PM

Conrad Allen

Re/Max Professional Associates - Webster, MA

Webster, Ma, Realtor

Hi Randy. Next year there will be no doc loans again

Jan 19, 2015 07:55 PM

Roy Kelley

Retired - Gaithersburg, MD

Let's hope that these instructions lead to some positive changes.

Jan 19, 2015 09:07 PM

Randy Kirsch

Right Trac Financial Group, Inc., NMLS# 2709 - Manchester, CT

(NMLS# 1012303) Your Dedicated Mortgage Consultant

The GSEs and the FHA seem to be heating up the competition among themselves George Souto and let's hope that they do get to a point of competing with conventional lenders. The directive from FHFA was not too specific however. More of a request to "explore". Could all be smoke and mirrors.

Thanks for sharing George.

Jan 20, 2015 08:40 AM

One of the things that the GSEs were requested to do was clarify the standards for buy-backs @Joe Petrowsky - otherwise the directive is not very specific in a number of ways and I will likewise be surprised if anything develops as a result.

Thanks for sharing Joe.

Jan 20, 2015 08:42 AM

There are some indications that some lenders are reverting to old ways Conrad Allen - only time will tell.

Thanks for sharing.

Jan 20, 2015 08:43 AM

I do hope something positive will result from the FHFA directive Roy Kelley - but I am not going to hold my breath.

Thanks for sharing, Roy.

Jan 20, 2015 08:44 AM

When there is too much cash and not enough qualified buyers the qualifications become diluted much to the detriment of society.

Jan 20, 2015 09:51 AM

It sounds like you learned some lessons from the Great Recession Conrad Allen

Thanks for sharing the additional comment.

Jan 21, 2015 08:02 AM

Nothing learned just knee jerk reactions Randy.

Jan 21, 2015 10:17 AM

Fannie, Freddie Told to Ease Credit Standards

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