Mortgage repurchasers Fannie Mae and Freddie Mac say that as of Sept. 13 they will no longer buy nontraditional mortgages from lenders who don’t follow underwriting and disclosure guidance issued by federal regulators last fall.

Fannie and Freddie were directed to follow the guidance, which applies to “exotic” interest-only and payment-option loans, by the Office of Federal Housing Enterprise Oversight, which oversees the government-sponsored entities.

The guidance advises lenders to qualify buyers using a loan’s fully indexed interest rate, rather than at lower introductory rates, and provide more information on the loan’s terms and potential for payment shock.

OFHEO Director James Lockhart called the GSEs’ adoption of the guidance “a significant step,” which will “address most originators of mortgages, both regulated and unregulated.”

Fannie and Freddie buy mortgages not only from federally regulated banks already subject to the guidance, but from nonbank lenders.

So far, 35 states and the District of Columbia have adopted the federal guidance, according to the Conference of State Bank Supervisors.

Show Comments Hide Comments

Comments

Sign up for Inman’s Morning Headlines
What you need to know to start your day with all the latest industry developments
Success!
Thank you for subscribing to Morning Headlines.
Back to top
We're giving away 3 free ICLV tickets at Connect Now next week. Register and attend live for your chance to win!REGISTER×
Log in
If you created your account with Google or Facebook
Don't have an account?
Forgot your password?
No Problem

Simply enter the email address you used to create your account and click "Reset Password". You will receive additional instructions via email.

Forgot your username? If so please contact customer support at (510) 658-9252

Password Reset Confirmation

Password Reset Instructions have been sent to

Subscribe to The Weekender
Get the week's leading headlines delivered straight to your inbox.
Top headlines from around the real estate industry. Breaking news as it happens.
15 stories covering tech, special reports, video and opinion.
Unique features from hacker profiles to portal watch and video interviews.
Unique features from hacker profiles to portal watch and video interviews.
It looks like you’re already a Select Member!
To subscribe to exclusive newsletters, visit your email preferences in the account settings.
Up-to-the-minute news and interviews in your inbox, ticket discounts for Inman events and more
1-Step CheckoutPay with a credit card
By continuing, you agree to Inman’s Terms of Use and Privacy Policy.

You will be charged . Your subscription will automatically renew for on . For more details on our payment terms and how to cancel, click here.

Interested in a group subscription?
Finish setting up your subscription