Alert May 14, 2013

FHFA Limits GSEs Loan Purchases to “Qualified Mortgages”

The FHFA announced that GSEs must limit their future mortgage acquisitions to loans that meet the requirements for a qualified mortgage under the CFPB’s qualified mortgage and ability-to-repay rules, including loans that meet special or temporary qualified mortgage requirements and mortgages that are exempt from the ability-to-repay requirements. As a result, beginning January 10, 2014, the effective date of the CFPB’s ability-to-repay and qualified mortgage rules (see January 10, 2013 Alert), Fannie Mae and Freddie Mac will no longer purchase loans that are subject to the ability-to-repay rule if the loan is not fully amortizing, has a term in excess of 30 years or generally has points and fees in excess of 3% of the total loan amount.

Both Fannie Mae and Freddie Mac will continue to purchase loans that meet the requirements of their respective selling guides. In determining whether a loan is a qualified mortgage, the GSEs will rely on a lender’s representations and warranties. The GSEs will also be determining whether changes will be made to their post-purchase file review process, repurchase requirements, and the required representations and warranties. Both Fannie Mae and Freddie Mac issued lender letters highlighting the changes.