Logo navy fm fannie mae underwriting guidelines pdf 72×242. 1900s in the USA were short term mortgages with balloon payments.
America’s homeowners lost their homes to banks. To address this, Fannie Mae was established by the U. Originally chartered as the National Mortgage Association of Washington, the organization’s explicit purpose was to provide local banks with federal money to finance home mortgages in an attempt to raise levels of home ownership and the availability of affordable housing. For the first thirty years following its inception, Fannie Mae held a monopoly over the secondary mortgage market. Other considerations may have motivated the New Deal focus on the housing market: about a third of the nation’s unemployed were in the building trade, and the government had a vested interest in getting them back to work by giving them homes to build. As such, Ginnie Mae is the only home-loan agency explicitly backed by the full faith and credit of the United States government. Residential Mortgage Loan Origination 2nd edition pg.
Freddie Mac, to compete with Fannie Mae and thus facilitate a more robust and efficient secondary mortgage market. The Fannie Mae laws did not require the Banks to hand out subprime loans in any way. In 1992, President George H. Bush signed the Housing and Community Development Act of 1992.
Additionally, Community Reinvestment Act regulators, under the direction of HUD secretary Andrew Cuomo, gave higher ratings to banks that financed home loans to “credit-deprived” areas. In essence, banks were rewarded for by-passing loan standards, and instead, approving loans to those who were at high risk of defaulting. Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980s. 90 million in salary and bonuses while he was head of Fannie Mae. In 2004, these rules were dropped and high-risk loans were again counted toward affordable housing goals.
The intent was that Fannie Mae’s enforcement of the underwriting standards they maintained for standard conforming mortgages would also provide safe and stable means of lending to buyers who did not have prime credit. We also set conservative underwriting standards for loans we finance to ensure the homebuyers can afford their loans over the long term. We sought to bring the standards we apply to the prime space to the subprime market with our industry partners primarily to expand our services to underserved families. Unfortunately, Fannie Mae-quality, safe loans in the subprime market did not become the standard, and the lending market moved away from us. In early 2005 we began sounding our concerns about this “layered-risk” lending. For example, Tom Lund, the head of our single-family mortgage business, publicly stated, “One of the things we don’t feel good about right now as we look into this marketplace is more homebuyers being put into programs that have more risk. Those products are for more sophisticated buyers.
Does it make sense for borrowers to take on risk they may not be aware of? Are we setting them up for failure? As a result, we gave up significant market share to our competitors. 2003 that Fannie Mae’s risk is much larger than is commonly held. The government-sponsored institution Fannie Mae, when I look at its risks, seems to be sitting on a barrel of dynamite, vulnerable to the slightest hiccup. But not to worry: their large staff of scientists deem these events ‘unlikely'”. The Senate legislation was an effort to reform the existing GSE regulatory structure in light of the recent accounting problems and questionable management actions leading to considerable income restatements by the GSEs.
After being reported favorably by the Senate’s Committee on Banking, Housing, and Urban Affairs in July 2005, the bill was never considered by the full Senate for a vote. 190 almost a year later in 2006 was the last action taken regarding Sen. Hagel’s bill in spite of developments since clearing the Senate Committee. The House Financial Services Committee had crafted changes and produced a Committee Report by July 2005 to the legislation.