Fannie Mae & Freddie Mac Are Relaxing Their Buyback Guidelines

Mortgage and Lending with George Souto NMLS #65149 FHA, CHFA, VA Mortgages NMLS #65149

Fannie Mae Selling Guide Announcement SEL-2014014 was released last Thursday, November 20th, announcing Fannie Mae & Freddie Mac Are Relaxing Their Buyback Guidelines in an effort to encourage Lenders to approve more loans.  Relaxing the Buyback Guidelines would be a major step to earn back Lender confidence, and reducing Lender Overlays.  So my question is, does Fannie Mae Selling Guide Announcement SEL-2014014 really accomplish this, or is it more sizzle without the meat?

The two GSE's claim Selling Guide Announcement SEL-2014014 provides the detail and clarity Lenders have been asking for on Mortgage Buybacks.  But after reading Selling Guide Announcement SEL-2014014, I have a lot of doubt whether Selling Guide Announcement SEL-2014014 really does that.  In fact to me Selling Guide Announcement SEL-2014014 creates more questions than it answers.

One of the major emphasis of Selling Guide Announcement SEL-2014014 is an attempt to clarify what the GSE's consider "Significant Misrepresentations".  But while Selling Guide Announcement SEL-2014014 states the number of mistakes a Lender is allowed to make is three, and five for data inaccuracies before the GSE's consider it a pattern of habitual "misrepresentations".  It does not, and this is a BIG DOES NOT, give a time period those "misrepresentations" need to occur in, in order to be considered a habitual pattern.  There is a big difference between making three misrepresentations and/or five data mistakes in one year, versus making the same number of mistakes over 20 years. 

Selling Guide Announcement SEL-2014014 also does not seem to clarify a time period a loan will be reviewed in to determine if there are any misrepresentations or data inaccuracies.  This has been one of the major complaints by Lenders.  Lenders want the GSE's to review loans within a reasonable specific period of time to determine if the Lender will need to Buyback a loan or not, instead of the present practice of waiting to review a loan only when the loan goes bad. 

Freddie Mac executive Vice President David Lowman seems to understand this in a statement he made:

Lenders have been specifically concerned that the life of loan exclusions could undermine the selling representation and warranty relief, leaving a back door for the GSE to put loans back to them after granting relief,"

But Selling Guide Announcement SEL-2014014 does not seem to provide timeline clarification for misrepresentations, and/or data inaccuracies.  This indicates to me the GSE's are still more concerned about keeping a level of vagueness in order to cover their own behind.  Rather than to provide Lenders with clear cut guidelines which would give them more confidence to relax some of the Lender Overlays to the GSE's Guidelines and approve more loans.

JPMorgan Securities mortgage strategist, Brian Ye, summarizes Selling Guide Announcement SEL-2014014 very well in one simple statement:

"I would describe this change as 'evolutionary,' rather than 'revolutionary,'"

I would expect Lenders to make some minor changes which may relax documentation a little bit, but I do not expect Lenders to make the major changes the GSE's hoped for as a result of Selling Guide Announcement SEL-2014014.  In order to bring about the change the GSE's hope to see from Lenders, the GSE's are going to have to provide Lenders with the "Black & White" guidelines Lenders have been asking for, and stop playing this cat and mouse game

Fannie Mae & Freddie Mac Are Relaxing Their Buyback Guidelines, but they still have a long way to go before Lenders are going to be comfortable enough to trust the GSE's are not leaving the door open for more unexpected Buybacks.




 Info about the author:

George Souto NMLS# 65149 is a Loan Originator who can assist you with all your #FHA, #CHFA, and #Conventional #mortgage needs in Connecticut. George resides in Middlesex County which includes #Middletown, #Middlefield, #Durham, #Cromwell, #Portland, #Higganum, #Haddam, #East Haddam, #Moodus, #Chester, #Deep River, and #Essex. George can be contacted at (860) 573-1308 or

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 Info about the author:

George Souto NMLS# 65149 is a Loan Originator who is licensed in #CT, #RI, #MA, #NH, & #FL and can assist you with all your #FHA, #Conventional, #VA, #USDA, and #State Bonded Progam #mortgage needs in #CT, #RI, #MA, #NH, & #FL. George resides in Middlesex County which includes #Middletown, #Old Saybrook, #Middlefield, #Durham, #Cromwell, #Portland, #Higganum, #Haddam, #East Haddam, #Moodus, #Chester, #Deep River, and #Essex. George can be contacted at (860) 573-1308 or


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Joe Petrowsky
Mortgage Consultant, Right Trac Financial Group, Inc. NMLS # 2709 - Manchester, CT
Your Mortgage Consultant for Life

Good morning George. That sounds good, but how will that translate into what the underwriters will be looking for going forward. It is going to take a lot for them to relax most of what they are are asking for to approve a file.

Make it a great week!

Nov 23, 2014 05:03 PM #1
Barbara Todaro
RE/MAX Executive Realty - Franklin, MA
Marketing Agent for The Todaro Team

Good morning, George.... I hope the approval process DOES's absurd what the underwriters keep digging for and it's right up to the day before closing.....

Nov 23, 2014 06:43 PM #2
Anita Clark
ColdwellBanker SSK Realtors ~ 478.960.8055 - Warner Robins, GA
Realtor - Homes for Sale in Warner Robins GA

George: As you stated, they both have a long way to go to gain lender confidence. Hopefully this is a tiny step in the right direction.

Nov 23, 2014 06:54 PM #3
Raymond E. Camp
Howard Hanna Real Estate Services - Ontario, NY
Licensed Real Estate Salesperson Greater Rochester

Good morning George,

As with anything connected to the government there are too many hands in the pie and too many loopholes!

Make yourself a great day.

Nov 23, 2014 08:14 PM #4
Dorie Dillard CRS GRI ABR
Coldwell Banker United Realtors® ~ 512.750.6899 - Austin, TX
Serving Buyers & Sellers in NW Austin Real Estate

Good morning George,

Thank you for the latest analyses of the new guidelines. True relaxing of the guidelines DO need to take place but as we know anything connected to the government is bound to ambiguous and full of way too many loopholes!

Nov 23, 2014 08:52 PM #5
Randy Kirsch
Right Trac Financial Group, Inc., NMLS# 2709 - Manchester, CT
(NMLS# 1012303) Your Dedicated Mortgage Consultant

George Souto - there seems to be an overall sentiment as you expressed that this relaxation of buybacks will not really be that helpful.  I do hope that things will loosen up soon, we need that to happen.

Nov 23, 2014 09:01 PM #6
Joan Cox
House to Home, Inc. - Denver Real Estate - 720-231-6373 - Denver, CO
Denver Real Estate - Selling One Home at a Time

George Souto  sounds like Fannie Mae & Freddie Mac   are trying to make it SOUND like it will ease the loan approval process.    The process our buyers go through in the last few days prior to closing is stressful! 



Nov 23, 2014 10:08 PM #7
Maria Gilda Racelis
Home Buyers Realty, LLC-Manchester, Bolton. Vernon,Ellington - Manchester, CT
Home Ownership is w/in Reach. We Make it Happen!

Good Morning George: Fannie and Freddie should get a nuptial agreement so that they can be more relaxed with their guidelines. Or would that marriage make matters worse.

On a more serious note, I hope to see a more improved and effective guidelines.

Nov 23, 2014 10:16 PM #8
Bill Roberts
Brooks and Dunphy Real Estate - Oceanside, CA
"Baby Boomer" Retirement Planner

George, Maybe we need to overhaul the process completely. I think that a secondary buyer of debt needs to "assume" some liability for the debt they buy. Maybe "insurance" should cover minor discrepancies. Fraud, on the otherhand, shouldn't end with the lender simply buying the loan back.

Bill Roberts

Nov 23, 2014 10:17 PM #9
Nina Hollander
Coldwell Banker Residential Brokerage - Charlotte, NC
Your Charlotte/Ballantyne/Waxhaw/Fort Mill Realtor

George... I suppose every little step helps in the long run. But in the end, I think a much bigger overhaul of the entire system is what's needed.

Nov 23, 2014 10:19 PM #10
Patricia Feager, MBA, CRS, GRI,MRP
Selling Homes Changing Lives

George it sounds a bit convoluted to me. I just wish lenders from across the country were invited to provide input before the government makes these regulations.

Nov 24, 2014 04:10 AM #11
Randy Mitchelson,APR
Marketing Coach & Homeland Heroes Home Loans - Bonita Springs, FL
First Impressions are made at First Click

For every action there is an equal and opposite reaction. Never fails. Buyback risk = Overlays. Permanent MIP = opportunity for  private non-QM lenders. And so it goes.

Nov 24, 2014 05:34 AM #12
Nick T Pappas
Assoc. Broker/Broker ABR, CRS, SFR, e-Pro, @Homes Realty Group, @HomesBirmingham & Providence Property Mgmnt, LLC Hun... - Huntsville, AL
Madison & Huntsville Alabama Real Estate Resource

George, as difficult as some underwriters are now, I'm not at all sure how much this will help.

Nov 24, 2014 07:49 AM #13
Ed Silva
RE/MAX Professionals, CT 203-206-0754 - Waterbury, CT
Central CT Real Estate Broker Serving all equally

George, I have a current buyer that is going through he _ _ with the underwriters and the pressure is on all to try and save the poor client's escrow, none of which she can afford to lose

Nov 24, 2014 08:58 AM #14
Lisa Von Domek
Lisa Von Domek Team - Dallas, TX
....Experience Isn't Expensive.... It's Priceless!

Hello George,

Hmmmm, a Government publication that creates more questions than it answers...why aren't we surprised?!!

Nov 24, 2014 09:49 AM #15
Sally K. & David L. Hanson
EXP Realty 414-525-0563 - Brookfield, WI
WI Realtors - Luxury - Divorce

Hmmm...well once again ...time will tell...some day maybe user friendly will be a criteria...dream dream dream.

Nov 24, 2014 10:46 AM #16
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