Regulator To Review New Fannie, Freddie Activities, Products
July 06 2009 - 5:02PM
Dow Jones News
The regulator for Fannie Mae (FNM) and Freddie Mac (FRE) late
last week issued a regulation governing the process for approving
new products or activities for the companies.
Under the new rule, the government-controlled mortgage finance
companies must notify their regulator, the Federal Housing Finance
Agency, when they want to engage in a new activity or sell a new
product.
New activities will be reviewed by the regulator for their
safety and soundness. New products will be reviewed by FHFA, but
also will be subjected to a period of public comment.
The new rule already took effect last Thursday, though the
agency will accept public comment on the change through August 31,
2009.
Fannie and Freddie have been engaging in a host of new
activities since they were put under the conservatorship of the
government last fall. They helped roll out the administration's
program to pay mortgage servicers to modify troubled loans.
To help underwater borrowers, they also agreed to guarantee
refinanced mortgages worth more than the home's value without
requiring the borrower to purchase additional mortgage insurance.
Last week, the administration expanded the program to include
borrowers whose loans are worth up to 125% of their home's value,
up from a 105% loan-to-value limit.
Previously, the companies required mortgage insurance or some
other credit enhancement for mortgages with 80% or higher
loan-to-value ratios. A senior FHFA official said the refinancings
for underwater homeowners would not rise to the level of a new
product under the new rule.
-Jessica Holzer, Dow Jones Newswires; 202-862-9228;
jessica.holzer@dowjones.com