Federal Housing Finance Agency (FHFA) Director Mel Watt has initiated a shift in policies with in the government run agencies Fannie Mae and Freddie Mac. The shift in policies intended to guarantee roughly half of all mortgage loans.
During a speech at the Brookings Institution on Tuesday May 13, USA Today reports Mr. Watt as stating the policy changes would include the following:
• Reversing a proposal it made last year, the agency will not reduce the size of mortgage Fannie and Freddie will back. Current rules limit those mortgages to $417,000 in most of the country and as big as $625,500 in higher-cost areas. Watt said the policy shift came after the agency heard "concerns about how such a reduction could adversely impact the health of the current housing finance market."
• Fannie and Freddie will continue to back loans even when the borrower misses two mortgage payments in the first three years after a lender acquires the loan. Under current standards, Fannie and Freddie can force lenders to repurchase those mortgages, which made those lenders reluctant to make the loans in the first place. That, Watt said, "undermines the goal of improving access to mortgage credit for creditworthy borrowers."
• The agency will launch a foreclosure relief pilot project in Detroit, which could give more relief to homeowners and help get foreclosed properties back on the market more quickly. "We believe this will be a win-win for hardest hit communities and for our conservatorship objectives," Watt said.