WASHINGTON - In a move that could help many more Americans obtain a mortgage, a top federal regulator says government-controlled mortgage giants Fannie Mae and Freddie Mac have reached an agreement with major banks on an issue that has been a stumbling block for the housing market since the financial crisis.
The head of the Federal Housing Finance Agency, which oversees Fannie and Freddie, announced the deal Monday at a conference of the Mortgage Bankers Association in Las Vegas. FHFA Director Mel Watt says the deal clarifies conditions in which banks could be required to buy back mortgages they sell to Fannie and Freddie for misrepresenting the loans' risks.
Watt says the agreement in principle will help make more mortgage credit available in a way that won't harm Fannie's and Freddie's finances.
He adds that it's currently hard for banks to know whether they'll have to buy back loans. That can make banks skittish about lending to borrowers with less pristine credit.
Said Watt in his prepared comments to the MBA conference: "These changes are a significant step forward that will result in a better Representation and Warranty Framework and facilitate market liquidity without compromising the safety and soundness of the Enterprises."