Freddie Mac Eases Mortgage Rules to Limit Putbacks

Freddie Mac, which along with Fannie Mae has forced home lenders to buy back tens of billions of dollars of flawed mortgages, said the companies are loosening rules that made banks more cautious about extending credit.

The government-backed companies will expand the pool of loans that become exempt from putback requests, Freddie Mac (FMCC) said in a memo to lenders Monday. Under the new rules, loans will typically be spared from such demands if borrowers make 34 of their first 36 scheduled monthly payments. Previously, borrowers needed to avoid delinquency for the first three years.

The changes were developed at the direction of the Federal Housing Finance Agency, the overseer of Fannie Mae and Freddie Mac. Mel Watt, who became head of the FHFA in January, is scheduled to speak tomorrow in Washington to outline his approach as tight credit slows a two-year housing recovery. First-time buyers and those with weaker credit have faced trouble getting mortgages from lenders seeking to avoid defaults and putbacks.

"The good news is the FHFA clearly is aware of this as a concern and I think they’re aware this is also a potential impediment to broadening credit access," said David Stevens, president of the Mortgage Bankers Association.

Bloomberg News
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