WASHINGTON (Dow Jones)
The regulator for Fannie Mae (FNM) and Freddie Mac (FRE) late last week issued a regulation governing the process for approving new products or activities for the companies.
Under the new rule, the government-controlled mortgage finance companies must notify their regulator, the Federal Housing Finance Agency, when they want to engage in a new activity or sell a new product.
New activities will be reviewed by the regulator for their safety and soundness. New products will be reviewed by FHFA, but also will be subjected to a period of public comment.
The new rule already took effect last Thursday, though the agency will accept public comment on the change through August 31, 2009.
Fannie and Freddie have been engaging in a host of new activities since they were put under the conservatorship of the government last fall. They helped roll out the administration's program to pay mortgage servicers to modify troubled loans.
To help underwater borrowers, they also agreed to guarantee refinanced mortgages worth more than the home's value without requiring the borrower to purchase additional mortgage insurance. Last week, the administration expanded the program to include borrowers whose loans are worth up to 125% of their home's value, up from a 105% loan-to-value limit.
Previously, the companies required mortgage insurance or some other credit enhancement for mortgages with 80% or higher loan-to-value ratios. A senior FHFA official said the refinancings for underwater homeowners would not rise to the level of a new product under the new rule.
Under the new rule, the government-controlled mortgage finance companies must notify their regulator, the Federal Housing Finance Agency, when they want to engage in a new activity or sell a new product.
New activities will be reviewed by the regulator for their safety and soundness. New products will be reviewed by FHFA, but also will be subjected to a period of public comment.
The new rule already took effect last Thursday, though the agency will accept public comment on the change through August 31, 2009.
Fannie and Freddie have been engaging in a host of new activities since they were put under the conservatorship of the government last fall. They helped roll out the administration's program to pay mortgage servicers to modify troubled loans.
To help underwater borrowers, they also agreed to guarantee refinanced mortgages worth more than the home's value without requiring the borrower to purchase additional mortgage insurance. Last week, the administration expanded the program to include borrowers whose loans are worth up to 125% of their home's value, up from a 105% loan-to-value limit.
Previously, the companies required mortgage insurance or some other credit enhancement for mortgages with 80% or higher loan-to-value ratios. A senior FHFA official said the refinancings for underwater homeowners would not rise to the level of a new product under the new rule.
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