Beginning Jan. 10, 2014, Fannie Mae and Freddie Mac will no longer purchase loans that don’t conform to the Consumer Financial Protection Bureau’s qualified mortgage rule, the Federal Housing Finance Agency announced Monday.
Fannie and Freddie will purchase mortgages that meet the special or temporary qualified mortgage definition, and loans that are exempt from the “ability to repay” requirements under the Dodd-Frank Act.
The FHFA said in a release the GSEs will not purchase a loan that is subject to the “ability to repay” rule if the loan is not fully amortizing, has a term of longer than 30 years, or includes points and fees in excess of 3% percent of the total loan amount.
Fannie and Freddie will continue to purchase loans that meet the underwriting and delivery eligibility requirements stated in their respective selling guides, including loans that are processed through their automated underwriting systems and loans with a debt-to-income ratio of greater than 43%.
Loans with a debt-to-income ratio of more than 43% are not eligible for protection as qualified mortgages under the CFPB’s final rule unless they are eligible for purchase by Fannie Mae and Freddie Mac under the special or temporary qualified mortgage definition.
The FHFA said the decision is consistent with the agency’s goal of “gradually contracting their market footprint and protecting borrowers and taxpayers.”
The CFPB has said it doesn’t want lenders to be discouraged from making mortgages that don’t conform to qualified mortgage standards.
“Plenty of responsible lending remains available outside of the qualified mortgage space, and we encourage you to continue to offer mortgages to those borrowers you can evaluate as posing reasonable credit risk,” CFPB Director Richard Cordray said in a March 11 editorial that ran in the publication National Mortgage News.
Cordray made a similar statement during a Feb. 5 NCUA virtual town hall.