Friday, July 10, 2020 / by Erik Bjorklund
In his analysis of current mortgage
credit tightening for the Joint Center on Housing Studies excerpted here earlier,
Don Layton included a special section on lender overlays. The former Freddie
Mac CEO focused specifically on how those overlays may be affected by the borrower
forbearance mandated by the CAREs Act
for borrowers impacted financially by the COVIC-19 pandemic.
During and after the 2008 housing
crisis mortgage intermediaries (originators) added their own underwriting requirements
to those required by the GSEs, FHA, and the VA. These overlays were designed to
counter "representation and warranty risk," - i.e., the possibility they would
be required to...