Fannie, Freddie must study 'alternate' credit scoring: regulator
Jan 15, 2015 09:38 AM EST
Fannie Mae and Freddie Mac's regulator hinted on Wednesday that credit standards could be eased when it laid out the 2015 goals for U.S. mortgage companies.
The Federal Housing Finance Agency directed the two government-controlled entities to explore "alternate" credit score models and the credit history of the loans they support.
The U.S. housing market's recovery has been held back by the difficulty many Americans face in obtaining credit. The FHFA's Director Mel Watt has said expanding access to credit is an important goal, but one that needs to be balanced against the risk of loan losses.
In the goals laid out for the two mortgage finance firms, the FHFA also said they should increase the purchase of loans backed by manufactured housing, as well as ramp up counseling services for buyers trying to obtain a mortgage or in early delinquency.
It also called on Fannie Mae and Freddie Mac to provide clarity on what is expected from mortgage loan servicers and to "enhance eligibility standards." Servicers have faced increased compliance standards as the United States has sought to learn from the mistakes that led to the financial crisis.
Under Watt's leadership, the FHFA spent much of last year expanding credit availability, including compelling Fannie Mae and Freddie Mac to launch programs that allow more borrowers to make down payments as low as 3 percent of a property's value.
Last December, it also directed them to begin paying into an affordable housing fund.
The goals spelled out for this year were largely in keeping with previously announced priorities for Fannie Mae and Freddie Mac. These include finalizing a new framework to govern when lenders are held liable for sour loans, reducing severely delinquent mortgages and building a common securitization platform.
Fannie Mae and Freddie Mac have been under U.S. government control since 2008 when their businesses collapsed during the financial crisis. They buy mortgages made by banks and repackage them as securities, which they offer with a taxpayer guarantee.