Lenders will get a reprieve from the threat of some mortgage-related penalties
The program will shield lenders against penalties stemming from faulty appraisals as long as those evaluations pass muster under an automated tool designed by Fannie Mae to root out mistakes. Fannie Mae also said it will let lenders verify borrowers' income and assets electronically in some cases.
The changes, while expected in some cases, are the latest step by Washington-based Fannie Mae to allay lenders' fears of sanctions for errors when issuing a mortgage.
Fannie Mae and Freddie Mac, which have been under government control since 2008, forced some lenders to buy back loans in the wake of the financial crisis after finding they contained errors or didn't meet the companies' guidelines. In response, many lenders established stricter demands than what the two companies required. Those moves lowered the chance of defaults and repurchase demands, but they also made it harder for homebuyers to get loans.
Over the past few years, Fannie Mae and Freddie Mac have made several changes to give lenders more certainty of the circumstances that will lead to penalties. Those changes, along with plummeting mortgage default rates, have led lenders to take off many of those so-called credit overlays.
The changes announced Monday are designed to give mortgage lenders more certainty that they won't be hit with penalties for appraisal mistakes. They also will allow lenders to verify borrowers' income, assets and employment electronically in some cases, rather than by collecting pay stubs and bank statements, which could speed the mortgage process. Fannie Mae in some cases will also let borrowers who refinance skip the requirement to have the property inspected.
The changes could expand the number of borrowers eligible for a loan at some lenders but the effect is unlikely to be substantial. Lenders have maintained onerous credit restrictions for loans backed by the Federal Housing Administration.
