Fannie, Freddie to offer clearer mortgage rules for banks

New agreement designed to boost lending to first-time homeowners

TRD New York /
Oct.October 21, 2014 12:41 PM

In an effort to ease tight credit that’s slowing down the housing market, Fannie Mae and Freddie Mac reached an agreement with banks to better define when bad practices and faulty information would force lenders to buy back home loans. 

The government-backed mortgage agencies aims to make it clearer under which circumstances they will force lenders to buy back loans that were issued on inaccurate information, Federal Housing Finance Agency Director Melvin Watt said during a speech on Tuesday, according to Bloomberg News. 

The goal: to ease credit. During the implosion of the housing market, banks had to buy back billions of dollars in mortgages they issued pre-collapse. As a result, financial institutions have been less willing to extend credit to first-time buyers or those with weak credit.

The government will play its own part to help inform lenders about how much liability they are facing for defaults or loans insured by the Federal Housing Administration, according to Bloomberg.

“Government must take action by shaping an environment where good lenders and good borrowers can work together without reservation,” Castro said, the news outlet reported. [Bloomberg News] — Claire Moses 


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