In November 2014, Fannie Mae generated much publicity when announcing major policy changes in their Representation & Warrant relief framework. These changes came as welcome news to mortgage lenders who originate and deliver loans to Fannie Mae.
The most noteworthy change related to the framework’s life of loan representations and warranties for misstatements, misrepresentations, omissions and data inaccuracies. These changes to the framework were effective retroactively for whole loans purchased and mortgage loans delivered into MBS with pool issue dates on and after January 1, 2013.
In order to assist lenders in their Risk Management efforts, Fannie Mae began publishing “Reps and Warrants Tracking Reports” that list, by loan number, loans that achieved sunset of most Reps and Warrants obligations based on loan payment history. These reports are being posted (beginning with the first report on December 5, 2014) in Message Manager on the fifth business day of each month.
So, it is recommended that lenders utilize these reports as a means to assess their overall risk in terms of receiving future repurchase requests. Perhaps some lenders will even proactively eliminate or relax some of their underwriting “overlays” if they receive favorable results from these new reports.
As the risk of receiving future repurchase requests diminishes, greater consideration should be given to easing up on more stringent underwriting policies – thereby enabling more prospective home buyers to qualify for conventional financing.
Now that Fannie Mae is offering 97% LTV financing for first-time home buyer, the timing is right for lenders to consider making such decisions.