WASHINGTON (12/4/14)--New guidelines from Fannie Mae and Freddie Mac take effect this week--guidelines meant to ease loan standards for borrowers.
According to a report in The Wall Street Journal, the two enterprises agreed in October to clarify when financial institutions would be penalized for making mistakes on mortgages sold to Fannie and Freddie.
According to Housing Wire, the new standards "offer clarification on when lenders can be penalized for making mistakes in the mortgage they sell to the government-sponsored enterprises. Many lenders say the lack of clarity in requirements have made them tighten their own lending rules too much, making it harder for the average buyer to qualify for a home mortgage."
Faster turnaround time for loans can also be expected. The Wall Street Journal said that the time between a loan application and the granting of the loan is more than two months. The report cites several major lenders that have said initial changes as a result of the guidelines could be seen in a few weeks, and the turnaround time for a loan will be reduced.
The guidelines will also give greater leeway to consumers with one-time events that affect their credit scores, such as the loss of a job or medical debt. Other changes include a reduction in the required paperwork.
The Wall Street Journal cited several lenders that will incorporate the changes immediately, while others said they would not ease lending conditions due to threats of litigation and a shifting regulatory environment.