by. Henry Meier
Whether or not your credit union offers mortgages, you got some good news yesterday. Former North Carolina Congressmanturned head of theFederal Housing Finance AdministrationMel Watt used his first major address since taking over in January to signal that Fannie and Freddie will move aggressively to help prop up the U.S. housing market. Considering that economic gurus as important as Janet Yellenhave signaled that continued weakness in the housing marketremains a key threat to a sustained economic growth, the fact that Fannie Mae and Freddie Mac are going to more aggressively try to jump start the housing market even though they are both in conservatorship is big news.
Among the steps announced by Watt are that:
- The size of mortgage loans that can be purchased by Fannie and Freddie will not be reduced. He explained that this decision was “motivated by concerns about how such a reduction could adversely impact the health ofthe current housing finance market.”
- Fannie and Freddie will increase the circumstances under which they will purchase mortgages that exceed a 43% debt to income ratio. Keeping in mind that any mortgage that Fannie and Freddie will purchase is considered a qualified mortgage, this has the potential of giving lenders greater underwriting flexibility.
- Fannie and Freddie will expand the useof more flexible buy back requirements. This may sound like boring stuff, but Fannie and Freddie have taken such a hard line when it comes to making lenders buy back mortgages with even minor regulatory defects that many lenders have imposed stricter lending requirements than they have to in order to ensure they comply with Fannie and Freddie guidelines. Remember when it comes to selling mortgages to Fannie and Freddie, it’s seller beware, not buyer beware.
