Beginning Jan. 10, 2014, Fannie Mae and Freddie Mac will nolonger purchase loans that don't conform to the Consumer FinancialProtection Bureau's qualified mortgage rule, the Federal Housing Finance Agencyannounced Monday.

Fannie and Freddie will purchase mortgages that meet the specialor temporary qualified mortgage definition, and loans that areexempt from the “ability to repay” requirements under theDodd-Frank Act.

The FHFA said in a release the GSEs will not purchase a loanthat is subject to the “ability to repay” rule if the loan is notfully amortizing, has a term of longer than 30 years, or includespoints and fees in excess of 3% percent of the total loanamount.

Fannie and Freddie will continue to purchase loans that meet theunderwriting and delivery eligibility requirements stated in theirrespective selling guides, including loans that are processedthrough their automated underwriting systems and loans with adebt-to-income ratio of greater than 43%.

Loans with a debt-to-income ratio of more than 43% are noteligible for protection as qualified mortgages under the CFPB'sfinal rule unless they are eligible for purchase by Fannie Mae andFreddie Mac under the special or temporary qualified mortgagedefinition.

The FHFA said the decision is consistent with the agency's goalof “gradually contracting their market footprint and protectingborrowers and taxpayers.”

The CFPB has said it doesn't want lenders to be discouraged frommaking mortgages that don't conform to qualified mortgagestandards.

“Plenty of responsible lending remains available outside of thequalified mortgage space, and we encourage you to continue to offermortgages to those borrowers you can evaluate as posing reasonablecredit risk,” CFPB Director Richard Cordray said in a March 11 editorial that ran in thepublication National Mortgage News.

Cordray made a similar statement during a Feb. 5 NCUA virtual town hall.