The threat to Fannie and Freddie appears to be over.

Mel Watt, the Director of the Federal Housing Finance Agency, announced in a speech last week at the Brookings Institution that he plans to maintain the role played by Fannie Mae and Freddie Mac in the housing finance market.  We think this is good news for the housing recovery, and also good news for those involved in risk management in the mortgage industry.

The housing industry recovery has been hampered by the uncertainty about the future role of Fannie and Freddie, and the pending legislative initiatives designed to unwind them.  With that legislation now apparently stalled, and with Watt’s statements about supporting a continuing role for the agencies for the foreseeable future, the housing market should be lifted by the prospect of greater clarity and stability in the near term.

For risk managers in the mortgage industry, who have been tasked with implementing the myriad changes required under the new FHFA regulations imposed on lenders and servicers, the stability provided by this shift in policy toward Fannie and Freddie should be welcome.  For decades, the agencies have been a primary source for risk management guidelines for the industry, and the threat of their demise – and the uncertainty about what would replace them – was a big added worry that can now be put on the shelf.

Link to May 13 Wall Street Journal blog post: https://blogs.wsj.com/economics/2014/05/13/six-takeaways-from-mel-watts-speech-on-housing/

Link to May 14 New York Times article:  https://www.nytimes.com/2014/05/14/business/Melvin-Watt-shifts-course-on-fannie-mae-and-freddie-mac.html?hpw&rref=business

As a vendor of risk management tools for loan quality and compliance, Cogent’s focus is on developing effective software solutions that accommodate the needs of different types of lenders.  Our software automates and optimizes business processes, while our clients, together with their legal and compliance departments, decide what kinds of audits they need to perform based on their business lines.

However, Cogent is occasionally asked for references to useful information in creating audit checklists.  The Tools & Resources section of our website provides this sort of information, including links to FNMA, FHLMC and HUD quality control guidelines.  In this post, we briefly mention two new sources of information:

FNMA Loan Defect Categories

This list shows the loan defects, by categories, identified by Fannie Mae in post–purchase review of their acquisitions. These defects (which may be eligibility violations [i.e. subject to repurchase]) are referenced in reporting to lenders on the quality of their deliveries.  These defect categories can become the basis of a lender’s audit checklist structure. A link to this loan defect category document is included among other useful links on FNMA’s Loan Quality web page, which we recommend bookmarking.

Mortgage Compliance magazine

This relatively new publication offers substantive and in-depth coverage of issues for “legal, regulatory compliance, risk management and quality assurance professionals.”  In addition to monthly issues, the publication also publishes weekly ‘newslines’, one of which recently offered a high-level approach to determining what CFPB rules and regulations apply to your organization.  Cogent will shortly be a contributor to this publication.