FHFA Limiting Fannie Mae and Freddie Mac Loan Purchases to “Qualified Mortgages”

On May 6, 2013 the Federal Housing Finance Agency (FHFA) announced that it has directed both Fannie Mae and Freddie Mac to limit their future mortgage acquisitions to loans that meet the requirements for a qualified mortgage, including those that meet the special or temporary qualified mortgage definitions.

Beginning on January 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 three percent of the total loan amount, or such other limits for low balance loans as set forth in the rule.

What this means is 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.

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 some loans with debt-to-income ratios of greater than 43 percent. Loans with debt-to-income ratios of more than 43 percent are not eligible for protection as qualified mortgages under the CFPB’s final rule unless the loans fall under the special small creditor qualified mortgage definition.

 

Questions? Contact the Compliance Hotline: 1.800.546.4465, compliance@nwcua.org.

Posted in Compliance, Compliance News, Federal, NWCUA.