FHFA Said to Plan Steps to Ease Lending to Riskier Buyers

A U.S. housing regulator plans new steps to encourage banks to lend to buyers with less than-perfect credit scores, according to two people with direct knowledge of the matter.

Melvin L. Watt, the director of the Federal Housing Finance Agency, will clarify in a speech next week when banks are required to buy back failing loans from Fannie Mae (FNMA) and Freddie Mac, said the people, who asked not to be identified because his plans aren't public. Lenders have complained they're hesitant to offer mortgages to riskier buyers, because its unclear what triggers requirements that they repurchase loans that go bad.

Watt will also discuss an effort that would allow borrowers to put down as little as 3 percent of the purchase price on loans backed by Fannie Mae and Freddie Mac, the people said.

Under current rules, lenders are permanently exempted from buybacks on loans with a three-year clean payment history. Watt's announcement, to come Oct. 20 in Las Vegas at the annual Mortgage Bankers Association conference, will help lenders understand when those exemptions apply, the people said.

Fannie Mae and Freddie Mac (FMCC), which have been under U.S. conservatorship since 2008, buy mortgages and package them into bonds on which they guarantee payments of principal and interest. Watt's announcement is part of an effort to encourage banks to ease credit and follows a series of steps he first described in May.

Peter Garuccio, an FHFA spokesman, declined to comment.

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Consumer banking Law and regulation
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