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An effort under way at housing-finance giant Freddie Mac could increase mortgage approvals for borrowers who might otherwise be shut out of home buying, the Wall Street Journal reported. Freddie has been testing underwriting software from a financial-technology firm, ZestFinance, that could make mortgages more available for certain applicants, including first-time home buyers and minorities. The software evaluates consumers’ borrowing and income histories in new ways. Freddie has been testing the software for at least several months as the mortgage giant is assessing whether the software can improve the accuracy of its own models’ risk predictions. Freddie and ZestFinance met with Freddie’s overseer, the Federal Housing Finance Agency, a few months ago to discuss the matter.

For years after the 2008 mortgage-market meltdown, Republicans and Democrats agreed on little about what to do with Fannie Mae and Freddie Mac except one thing: Get rid of them. A Trump administration housing-finance roadmap released last week would do the opposite, allowing the government-controlled companies to remain at the center of the American home-ownership system for years to come, according to a Wall Street Journal commentary. The government reluctantly recognized the difficulty of replacing institutions that undergird the home-buying market. The administration’s report outlines a path that would return the firms to private ownership but with a government backstop. An envisioned multiyear transition won’t have any immediate effect on housing markets, but its impact in the future will turn on many details that remain to be decided. How policy makers and the companies balance the competing demands of protecting taxpayers, delivering a return to the companies’ shareholders and ensuring access to home loans will help determine who gets mortgages and on what terms. Fannie and Freddie don’t make loans but buy them from lenders. They package them into securities that are sold to investors, and provide guarantees to make the investors whole if the loans default. This enables lenders get their money back so they can lend again, by matching them up with investors such as pension and hedge funds that wouldn’t otherwise invest in home loans. This role has helped preserve America’s popular 30-year, fixed-rate mortgage — something few other countries have — including during savings-and-loan crises in the 1980s. It also requires an unusual degree of government support. The setup relied on an implicit understanding in bond markets that the U.S. government would bail out Fannie and Freddie if they ever got into trouble, given the importance of their middleman role for the national economy.

Blackstone Group Inc. boosted its offer to buy its own portfolio company Stearns Lending Inc. out of bankruptcy under a settlement with the mortgage lender’s top creditor, WSJ Pro Bankruptcy reported. The private-equity firm on Wednesday raised its bid to $65 million from $60 million to secure a deal with Pacific Investment Management Co., which agreed to support a reorganization plan that would keep Stearns under Blackstone’s control despite the bankruptcy. Under the proposal, Blackstone would increase its stake in Stearns to 100 percent from 70 percent in return for the capital contribution. The money is earmarked to cash out $183 million in bonds, roughly two-thirds of which are held by Pimco. At various points, Pimco has questioned Blackstone’s attempted takeover of Stearns, saying the mortgage lender wasn’t making a fulsome effort to put the private-equity firm’s offer to the test. The nation’s 20th-largest mortgage lender, Stearns filed for bankruptcy in July after hitting an impasse with Pimco during debt-restructuring negotiations. Blackstone made a $60 million offer for full ownership of the company, an unusual outcome in chapter 11 proceedings in which owners are typically wiped out when creditors aren’t paid in full.

The University of Oklahoma has provoked a confrontation with some of the largest investors in the tax-exempt bond market, propelling a struggling $250 million student-housing project on the path to default, WSJ Pro Bankruptcy reported. UMB Bank NA, the trustee for bondholders that financed the luxury dormitory project, said in a letter Friday that officials had turned their backs on the bond market by failing to renew leases on the facility’s commercial spaces and parking spots. The lease terminations tied to the university’s Cross Village dormitories removed a key source of revenue for the housing project, heightening the likelihood that investors won’t be paid in full. Those investors include Invesco Ltd. and MacKay Shields LLC, a person familiar with the matter said. Already, the project has dipped into reserve funds to stay current on debt obligations. “This reckless repudiation makes the entire transaction appear like the university wants the project to fail for the pecuniary benefit of the university and at the expense of investors,” UMB said. On Tuesday, the university’s attorney said it “broke no promise, but simply exercised its explicit contractual rights” to walk away from leases it no longer wanted.

Bankrupt mortgage servicer Ditech Holding Corp. cleared the way for the $1.8 billion sales of its businesses by agreeing on Tuesday to preserve some homeowner claims like the right to fix mistakes on their loans, Bloomberg News reported. The accord ends a dispute over the sales, allowing Ditech to pay creditors and exit bankruptcy. A group of consumer creditors as well as attorneys general from about a dozen states objected to a previous plan to offload the assets in “free and clear” transactions. Those arrangements would have stripped homeowners of rights, including those that could help them save their homes from wrongful foreclosures, the New York attorney general’s office wrote in its objection to the sales. Late last month the federal judge overseeing the case sided with consumers and state authorities and rejected the sales. The bankruptcy court still needs to approve the new deal as part of Ditech’s bankruptcy plan. A hearing is slated for Sept. 25. After negotiations this month, Ditech and the consumer creditor group reached an agreement that creates a $10 million fund for claims holders and requires the appointment of a special master to hear consumer claims, Ditech lawyer Ray Schrock said in court. The sale doesn’t ratify mistakes in mortgage accounts and both Ditech and the new buyers have committed to investigate account misstatements and correct them.