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New Dispute Resolution Option Available for Fannie Mae and Freddie Mac Lenders in Loan Buybacks

Saturday, February, 13, 2016

Lenders will not be given the option of filing an appeal with an independent arbitrator if they are fighting demands to repurchase problem loans that were sold to government-sponsored enterprises (GSEs) Freddie Mac and Fannie Mae. The announcement was made by the Federal Housing Finance Agency (FHFA) that Fannie and Freddie established independent resolution processes that can be used once the other opportunities for appeals are complete. All loans sold to Fannie and Freddie since January 1st, 2016 will have this option.


This process provides everyone involved the opportunity to resolve a repurchase dispute and avoid having the dispute languish for a long period of time. This has been the case in many instances so far, costing everyone involved a great deal of time and money.


Now, prior to the loan being sold to Fannie or Freddie, the lender must make certain quality assurances and Fannie or Freddie have the option of demanding repurchase if the lender is guilty of false claims or the loan does not meet the originally agreed-upon standards. This most often occurs after default loans.


Some familiar with the situation that are housing advocates point out lenders have been cautious in lending so they could avoid buybacks and lawsuits. Some have even added extra credit requirements that surpassed Fannie and Freddie guidelines, which are known as overlays. It resulted in limited access for some loan applicants.


The Mortgage Bankers Association is pleased with the ruling and points out up until now there was no independent arbitration process and the only option was litigation. The ruling provides a feasible option for small and mid-sized lenders