Reuters: Regulatory News: REFILE-UPDATE 1-U.S.regulator to give banks clarity on mortgage buybacks

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REFILE-UPDATE 1-U.S.regulator to give banks clarity on mortgage buybacks Sep 10th 2012, 22:43 Mon Sep 10, 2012 6:43pm EDT WASHINGTON, Sept 10 (Reuters) - The regulator for Fannie Mae and Freddie Mac said on Monday it would give banks more clarity on which type of mortgage loans they would be required to buy back if the loan sours. Government-controlled Fannie Mae and Freddie Mac will review the quality of the mortgage shortly after the loan has been sold rather than af ter it has de faulted or a borrower ha s mi ssed payments, the Federal Housing Finance Agency (FHFA) said. The regulator said it would also give banks more certainty that they would not have to repurchase loans that performed well over a period of time such as th ree years. "This is an important step in improving upon past business practices," the regulator's acting director, Edward DeMarco, said in remarks delivered at a conference in No rth Carolina. Reviewing the quality of the loan when the loan deteriorated m ade the problems harder to correct, s aid D eMarco, who was addressing the American Mortgage Conference. The government-owned companies, which buy mortgages from lenders and repackage them as securities for investors, have been fighting with the banks over who should shoulder losses from bad home loans made during the housing bubble. The new standards for the so-called "representations and warranties" or promises banks make when selling the mortgages will ap ply to loans sold on or after Jan. 1, 2013.

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