Federal Housing Finance Agency (FHFA) Director Mel Watt said on Tuesday that the agency will continue to allow debt-to-income ratios higher than 43 percent for some loans purchased by government mortgage giants Fannie Mae and Freddie Mac.
Speaking at an event hosted by the Brookings Institution, Watt said in prepared testimony that agency guidelines make some of the loans with DTI above 43 percent eligible for purchase if the borrower has “other compensating strengths.”
“FHFA will continue to permit these compensating factors in each company’s underwriting standards,” Watt said. “As part of our ongoing safety and soundness obligations, we will, of course, continue to monitor performance data relating to these factors.”
Watt also said the agency would abandon a proposal released last year to use its conservatorship authority to reduce loan limits, citing concerns over the potential impact on the recovering housing finance market.
Additionally, Watt said the agency would focus its efforts on establishing a securitization platform that can handle Fannie and Freddie’s operations and will be adaptable for use by other players in the secondary market.
“A successful outcome will be a seamless transition from the current in-house systems that issue new securities at each Enterprise to a future joint venture owned by Fannie Mae and Freddie Mac that operates one system with updated technology,” Watt said.