Fannie Mae and Freddie Mac on Tuesday suspended bulk sales and limited remaining purchases to mortgages no more than six months old as they added new measures related to the impact of COVID-19.
For example, Fannie created some flexibility for originators, allowing for remote online notarization in three additional states, while also suspending representation and warranty relief for
Freddie also said that sellers would remain responsible for representations and warranties if employment alternatives are used and that it will allow for RON use where authorized.
Other temporary alternatives the GSEs have allowed for due to COVID-19 include
Both Freddie and Fannie will limit representation and warranty relief for appraisals if these alternatives are used.
Prior to the coronavirus outbreak in the United States, the GSEs had been increasing the rep and warranty relief they offered upfront for data-based verifications of certain property and borrower information.
Loan data points that lenders must include in representations and warranties to the GSEs during loan sales can be used as a basis for Fannie or Freddie to ask a mortgage company to buy a loan back if that information is found not to hold true.
Due to the impact of the coronavirus on health and the economy, the likelihood that borrowers' finances or property values will change over time is high, and loan buyback risk has risen as well.
The spread of the virus has marked the end of a long period of economic growth in the United States. The country's gross domestic product has contracted by 4.8% year-to-date.
