Reps and Warrants: Lessons from the GSES Experience
Posted: 13 Jun 2016
Date Written: 2014
Obtaining a loan guaranteed by Fannie Mae and Freddie Mac is more difficult today than it was in 2001. While many factors have caused this change, the system of representations and warranties, under which lenders can be forced to repurchase loans long after they are sold to the GSEs, is a hidden contributor. Recent efforts by Fannie and Freddie and their regulator to fix the problem should help, but there is room to give lenders greater assurance without harming Fannie and Freddie. And that assurance should translate into greater lender willingness to increase lending by expanding “the credit box".
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