FHFA limiting Fannie Mae, Freddie Mac loan purchases to ‘qualified mortgages’
As of January 10, 2014, Fannie Mae and Freddie Mac must limit their future mortgage acquisitions to loans that meet the requirements for a qualified mortgage, including those 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.
Under the directive issued May 6 by their regulator, The Federal Housing Finance Agency (FHFA), Fannie Mae and Freddie Mac will no longer purchase any loan subject to the Consumer Financial Protection Bureau's "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 three percent of the total loan amount, or such other limits for low balance loans as set forth in the rule.
Effectively, this means Fannie Mae and Freddie Mac will not purchase interest-only loans, loans with 40-year terms, or those with points and fees exceeding the thresholds established by the rule, the FHFA said in a release.
Fannie Mae and Freddie Mac will be able to continue purchasing loans that otherwise meet the underwriting requirements in their selling guides, including loans where the borrower's debt-to-income ratio is greater than 43%.