Fannie Mae Chairman and Chief Executive Officer James A. Johnson this week said Fannie Mae is committed to eliminating the risk mortgage lenders face from requests that they repurchase home loans they sell to Fannie Mae.
Mr. Johnson set a company goal of steadily reducing the number of requests for loan repurchases by lenders. He said that the most important effect of the changes will be an increase in affordable housing lending nationwide by a reduction in lenders' worries that they will be forced to buy back riskier loans.
"Mortgage lenders should be free of the fear of being required to repurchase loans they sell to the secondary mortgage market, especially affordable lending mortgages," said Johnson. "Beginning today, Fannie Mae will make a substantial reduction in the number of loan repurchases lenders will face."
"Today's announcement by Jim Johnson demonstrates Fannie Mae's responsiveness to the needs of its lender partners as together we pursue our collective commitment to affordable housing," said Paul Reid, president of the Mortgage Bankers Association of America and president and chief executive officer of American Home Funding, Inc.
"Eventually, we want to eliminate repurchase requests entirely from the mortgage funding process," Johnson said. "That's a big goal which will require continuing progress in underwriting quality, technological innovations, and the general understanding of affordable housing lending."
As first steps in the effort, Johnson said Fannie Mae will:
* Make a one-time "Clean Slate" announcement, which largely frees lenders from concern that Community Home Buyer loans sold to Fannie Mae in the past six years will be subject to repurchase. According to Fannie Mae, the total dollar amount of these loans outstanding is $22 billion;
* Eliminate fees to lenders for automated underwriting technology when Fannie Mae's software system, "Desktop Underwriter," is used to sell Community Home Buyer loans to Fannie Mae (loans approved by the system automatically receive a waiver of repurchase risk if the information used by the lender is correct);
* Guarantee Fannie Mae officer-level review and approval of repurchase requests;
* Discontinue buyback requests on performing loans;
* Create a pilot "Independent Review," a project in which a select group of experienced industry leaders will review loan files submitted by lenders who want to appeal a Fannie Mae repurchase decision. Each of the independent reviewers would determine whether the buyback request was justified or not, and Fannie Mae would abide by the decision of the reviewer.
"The first half of this decade has been a period of exciting new activity on the affordable lending front," Johnson said. "Our customers stepped up to the challenge of providing more access to …