FHFA Announces Easing of Mortgage Standards

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WASHINGTON, D.C. – October 27, 2014 – (RealEstateRama) — The Federal Housing Finance Agency (FHFA) announces plans to expand home buyers’ access to mortgages by loosening up lending standards. FHFA said it will release guidelines by the end of November to allow increased lending to borrowers with down payments as low as 3 percent.

FHFA, which regulates Fannie Mae and Freddie Mac, also will help lenders who sell loans to the mortgage giants by easing standards on borrowers who don’t have perfect credit profiles. The move is expected to help open up credit to first-time buyers, self-employed borrowers, borrowers who have had recent job switches, and borrowers who faced financial hardship during the recession.

Fannie and Freddie would not force repurchases from lenders of mortgages that are later found to have minor flaws in them, as long as borrowers have kept up with their mortgage payments for 36 months. Interestingly, FHFA also said lenders won’t be forced to buy back bad loans if flaws were later discovered in the reporting of borrowers’ finances, debt loads, and down payments—as long as the borrowers would have qualified for the loans had the information been accurate.

FHFA said it will clarify to lenders when it will force buy-back loans that were issued based on inaccurate information. FHFA acknowledges that it failed to provide lenders with enough clarity in the past. That caused lenders to become overly cautious with extending credit for home sales after facing a flood of high-dollar settlements from loans they issued that later turned bad.

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