Fannie Mae, Freddie Mac to Limit Loan Purchases

Beginning January 10, 2014, Fannie Mae and Freddie Mac will no longer purchase interest-only loans, loans with 40-year terms, or those with points and fees exceeding certain thresholds.

The move is to bring the agencies in line with a final ruling by the Consumer Financial Protection Bureau.

The new directive precludes Fannie and Freddie from purchasing loans which are:
Not fully amortizing;
Have terms of longer than 30 years; or,
Include points and fees in excess of 3% of total loan amount.

Fannie and Freddie will continue to purchase loans that are processed through their automated underwriting systems and loans with a debt-to-income ratio of greater than 43 percent. Loans with a debt-to-income ratio of more than 43 percent are not eligible for protection as qualified mortgages under the CFPBs final rule unless they are eligible for purchase by Fannie Mae and Freddie Mac under the special or temporary qualified mortgage definition.

Adoption of these new limitations by Fannie Mae and Freddie Mac is in keeping with FHFAs goal of gradually contracting their market footprint.

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