At the direction of the Federal Housing Finance Agency (FHFA), Fannie Mae and Freddie Mae have implemented an independent dispute resolution (IDR) program, which was developed to assist in resolving repurchases disputes. Lenders are allowed to submit unresolved disputes to a third party arbitrator once all other efforts have been exhausted. This will hopefully clear up many of the disputes that can take an extended period of time to resolve and will provide clarity for lenders, ultimately increasing access to mortgage loans for creditworthy borrowers, according to the FHFA news release.
The new IDR process is not expected to be used frequently and most disputes will continue to be resolved through the appeal and escalation processes already in place. The arbitrator’s determination will be the final decision on whether or not a defect existed at the time the IDR began. Their determination will include a written award and a brief opinion. The components of the IDR process will hopefully allow lenders to better manage their risk in determining the best course of action for a repurchase situation.
According to SEL-2016-01 and Bulletin 2016-1, all updates will be incorporated into the Fannie Mae Selling Guide and the Freddie Mac Guide later this year and are effective for loans dated January 1, 2016.