GSE relief on repurchase risk not quite there

By Sari R. Updated on 10/9/2012

There is a new plan in the works that will relieve repurchase risk for lenders as they sell loans to Fannie and Freddie.  Analysts are afraid that this new plan won’t come through enough to reduce the concerns of finance firms. 

The new plan, announced last month, will make it so that mortgage servicers will need to assess repurchase risks.  Analysts believe that this task isn’t feasible.  The government housing agencies claimed that they would introduce new reps and warrants requirements, give relief on reps and warrants putback risk regarding loans that show good payment histories.

Under this particular clause, GSEs are able to mandate that lenders buy back loans that break upfront representations made about the loan.  In order to avoid buyback risk, all the loans acquired by GSEs after 1/1/2012 only have to prove that:

·         the loan didn’t have any 30-day or greater delinquencies during the first 36 months

·         the loan didn’t have more than two 30-day delinquencies AND no 60-day or greater deliniquencies

·         the loan has to be current at month 60 after the GSE acquisition date

Analysts state that while they can see signs of improvement, it’s still difficult to predict life changes, which are often the big factors relating to repurchase risk.

 

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