Fannie Mae and Freddie Mac buy billions of dollars worth of mortgages and have their own rules and regulations; but they both refuse to buy any loans containing binding mandatory arbitration clauses. Freddie Mac stopped purchasing loans with mandatory arbitration clauses August 2004 and Fannie Mae followed their example on October 31, 2004.

“Freddie Mac believes that all homeowners should be able to voluntarily choose the mortgage dispute resolution option they believe to be in their best interests,” said Paul Peterson, Freddie Mac’s chief operating officer when the decision was made.

The rejection of binding mandatory arbitration clauses on home loans by mortgage giants Freddie Mac and Fannie Mae will discourage the practice amongst smaller players throughout the industry.