Speaking to the nation’s largest lender trade group, the government’s chief housing regulator outlined plans to reassure mortgage bankers that fear they could suffer losses on the loans they sell to the government.
“As lenders, you play a central role in the overall housing market, and the work you do touches borrowers in communities across the country,” said Melvin L. Watt, director of the Federal Housing Finance Agency at a speech Monday to the Mortgage Bankers Association in Las Vegas, Nev. “To fulfill both sides of our shared responsibility, I hope our actions provide sufficient certainty to enable your companies to reassess existing credit overlays and more aggressively make responsible loans available to creditworthy borrowers. This will result in a housing market that is not only better for borrowers, but also better for the Enterprises and lenders and beneficial to our country.”
Lenders big and small, who have paid tens of billions of dollars to settle legal cases to buy back troubled loans sold to Fannie Mae and Freddie Mac, have imposed tight credit standards, costing the bankers tens of billions of dollars in lost business.
Watt said FHFA plans to exempt lenders in some cases who make errors from buying back mortgages.
“We know that access to credit remains tight for many borrowers,” said Watt, a former Democratic congressman from North Carolina.
He said details of the new changes would be announced by Fannie Mae and Freddie Mac in the coming weeks.
“We have started to move mortgage finance back to a responsible state of normalcy — one that encourages responsible lending to creditworthy borrowers while maintaining safety and soundness of the Enterprises.”