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.