Fannie Mae recently canvased a few of its lenders to gather reactions to the new representation and warranty framework it recently put into operation.  Karen Nielsen, writing on the Fannie Mae's Housing Industry Forum reports that, on the whole, the response has been positive.

Nielsen said that the biggest concern expressed by those lenders contacted was no longer with the framework - about which many apparently had a lot of early trepidation, but about what will happen when Fannie Mae steps up quality control reviews.  The new framework, under which lenders have been delivering loans since January 1, releases lenders from most liabilities after 36 months of consecutive on-time payments have been made or 12 months in the case of refinances done through the Home Affordable Refinance Program (HARP). 

She reported quotes from lenders to the effect that they appreciate the shortened exposure to buy-backs or repurchases following the changes rather than having to anticipate getting repurchase requests under the old rules on loans made years earlier.  

Some viewed that more limited exposure as a quid pro quo, with one saying that Fannie Mae is rewarding lenders for improving their checks and balances from a technical aspect upfront.   Margaret Sullivan, senior vice president for Credit Portfolio Strategy at Fannie Mae seemed to confirm this, telling Nielsen, "Lenders wanted more certainty about rep and warranty.  They want to know sooner if there is a liability, and Fannie Mae management wants to make sure we know the quality of loans in our book."

One lender questioned whether the three year sunset on well performing loans means that Fannie Mae will never come back to them and consequently the lender will no longer have to provide reserves for that off-balance sheet exposure.

Sullivan said that Fannie Mae does not advise lenders on their loss reserves but noted that that the three-year sunset is real and the only exceptions relate to lifetime exclusions clearly defined in the company's Selling Guide.

Nielsen say what has lenders' attention is Fannie Mae's stated its intention to request more files for review and a wider sampling of performing loans, usually in the first few months after loan purchase. Sullivan said larger lenders are familiar with regular file requests, which find errors in about 3 percent of newly acquired loans submitted for review, but some smaller lenders have never received a file request may need to brush up on the guidelines. If help is needed Fannie Mae has resources available to help lenders train staff on how to properly underwrite loans for sale to the company.