The Federal Housing Finance Agency (FHFA) has announced updates to several Fannie Mae and Freddie Mac policies including expanding eligibility for appraisal waivers on purchase loans; expanding eligibility for the Freddie Mac performing loan repurchase alternative pilot; and expanding the Uniform Appraisal Dataset to include appraisal data from applications for FHA-insured loans.
Following the launch of a targeted pilot program to offer lenders a fee-based alternative to repurchase requests for performing loans with defects, Freddie Mac will expand this pilot to all approved lenders.
Under this expansion, lenders will be able to opt in to the fee-based repurchase alternative annually. Additionally, for lenders that do not participate in the pilot, Freddie Mac will offer a “Fee Only” option, for which the fee is charged on the defective loan only, in lieu of a repurchase. This offering will better align the repurchase alternative offerings across the Enterprises.
In addition, Freddie Mac will expand its performing loan repurchase alternative pilot, making it open to all approved lenders. Under this expansion, lenders will be able to opt in to the fee-based repurchase alternative annually. Additionally, for lenders that do not participate in the pilot, Freddie Mac will offer a “Fee Only” option, for which the fee is charged on the defective loan only, in lieu of a repurchase. This offering will better align the repurchase alternative offerings across the Enterprises.
Also, Freddie Mac will provide advance notice of certain enterprise pricing increases: For loans delivered through the mortgage-backed security (MBS) swap channel, the enterprises will provide 60 days advance notice of increases to their base guarantee fees greater than 1 basis point. This policy will ensure the enterprises have flexibility to appropriately manage their business operations while also providing lenders with more certainty when pricing loans.
“Today’s announcements highlight actions that will better ensure the Enterprises are reliable sources of liquidity for lenders of all sizes and types, which in turn will promote access to sustainable credit for consumers,” says Sandra L. Thompson, director of the FHFA, in the release. “FHFA is committed to supporting current and aspiring homeowners, as well as renters, who face persistent affordability challenges in the housing market.”
In a statement, Bob Broeksmit, CMB, president and CEO of the Mortgage Bankers Association says, “expanding Freddie Mac’s pilot program is another important step toward encouraging high-quality underwriting and eliminating performing loan repurchases.”
“We also support the expansion of appraisal waivers, which will lower costs for moderate-income first-time buyers,” Broeksmit says.
“A 60-day advance notice for some guarantee-fee increases is a response to our concerns and is a welcome development that will allow lenders to better manage their pricing strategies and loan pipelines,” Broeksmit says. “We have long called for increased pricing transparency and believe more conversations are needed to better balance who bears the risks of pricing volatility between the primary market and the GSEs.”
As Fannie Mae explains in a separate release, beginning in the first quarter of 2025, for purchase loans for primary residences and second homes, the eligible loan-to-value (LTV) ratios for its Value Acceptance program will increase from 80% to 90% and Value Acceptance + Property Data will increase from 80% to the program limits. Both options are designed to match the risk of the collateral and the loan transaction.
“Fannie Mae is on a journey of continuous improvement to make the home valuation process more effective, efficient, and impartial for lenders, appraisers, and secondary mortgage market participants while maintaining Fannie Mae’s safety and soundness,” says Jake Williamson, senior vice president of single-family collateral and quality risk management for Fannie Mae. “Responsibly increasing the eligibility for valuation options that leverage data- and technology-driven approaches can also help reduce costs for borrowers.”
Since early 2020, Fannie Mae estimates the use of appraisal alternatives, such as its Value Acceptance and Value Acceptance + Property Data, on loans its has acquired saved mortgage borrowers more than $2.5 billion.
With regard to the expansion of Freddie Mac’s repurchase alternative pilot, Sonu Mittal, senior vice president and head of single-family acquisitions at Freddie Mac, says the announcement is “part of making good on our commitment to be part of the solution and build upon the progress we already made with lenders and industry partners over the past year. We know lenders will continue doing their part to keep improving loan quality.”
Photo: Roger Starnes Sr