FHFA Officially Directs GSEs To Purchase QMs Only

This week, the Federal Housing Finance Agency (FHFA) followed up on a final rule issued in January by directing Fannie Mae and Freddie Mac to purchase only loans that meet the new requirements of a ‘qualified mortgage.’

Such mortgages include those that meet the special or temporary qualified mortgage definition and loans that are exempt from the ‘ability to repay’ requirements under the Dodd-Frank Act.

‘The rule generally requires lenders to make a reasonable, good faith determination of a consumer's ability to repay before originating a mortgage loan and establishes certain protections from liability for 'qualified mortgages,'’ Fannie Mae outlined in a recent lender letter.

Beginning Jan. 10, 2014, Fannie Mae and Freddie Mac will no longer purchase a loan that is subject to the "ability to repay" rule if the loan is not fully amortizing, has a term of longer than 30 years or includes points and fees in excess of 3% of the total loan amount (or such other limits for low-balance loans).

‘Effectively, this means Fannie Mae and Freddie Mac will not purchase interest-only loans, loans with 40-year terms or those with points and fees exceeding the thresholds established by the rule,’ the FHFA said.

Fannie Mae and Freddie Mac will continue to purchase loans that meet the underwriting and delivery eligibility requirements stated in their respective selling guides. This includes loans that are processed through their automated underwriting systems and loans with a debt-to-income ratio of greater than 43%.


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