GSEs Launch Dispute Resolution Process for Loan Repurchases

Fannie Mae and Freddie Mac today announced a new independent dispute resolution process for conflicts over mortgages that the housing GSEs require lenders to repurchase. The announcement comes in response to concerns from lenders that unwarranted loan repurchases negatively affect mortgage lending, and the process is the final piece of the GSEs’ new representation and warranty framework introduced beginning in 2012.

Under the new process — which takes effect for loans originated on or after Jan. 1, 2016 – lenders may submit unresolved loan-level disputes to a third-party arbitrator after the appeals process is completed within the GSEs. The process provides for collective proceedings for groups of disputed loans and allows for reimbursement of costs to the prevailing party.

Further details about the dispute resolution process, as well as updates to Fannie and Freddie’s internal appeals processes, will be released this year.