Mike Vitali comments on recent WSJ article by John Carney on new FHFA lending targets.
A WSJ article (Article) reports that Fannie and Freddie are increasing their targets for the purchase of loans made to low to moderate income home buyers.
Say what? Wait a minute, isn’t that what helped lead to our problems in the first place? The idea is that by increasing their appetite lenders will originate more of these loans and sell them to the Agencies (especially since FHA has raised its premiums). But, will lenders be so inclined to do so in light of what just happened with the loans previously sold to these agencies?
Will lenders forget all about the repurchase demands and related expense in response and defense to these demands? I doubt it. What about the major settlements with the big banks? I think they may not be too eager to jump back in bed with these agencies. Lenders need to tread very carefully here to be sure of what is expected (new quality standards) and what the consequences may be of originating these loans and selling them to Fannie and Freddie. The devil is always in the details and we don’t want to go through that hell again.
On the other hand, and I caution, if done properly, these loans may provide the opportunity for more business for some lenders. Something we all can use. The choice is yours, just make sure you have all your ducks in a row so you can manufacture a quality loan that won’t come back to bite you. Good luck.