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Special Reports
Secondary Market
Both GSEs Plan to Make Secondary Sales Easier
By Brad Finkelstein
Representatives of Fannie Mae and Freddie Mac updated the attendees at the Regional
Conference of Mortgage Bankers Associations here regarding how their companies plan to make selling loans into
the secondary market easier.
Zack Oppenheimer, regional vice president of Fannie Mae, noted that the market
is slowing down, margins are compressing, there is intense competition and consolidation is starting to take place.
There is a price slowdown in the northeast, but it is unlikely that the region
is slipping back into a housing recession similar to what took place in the 1990s.
The bottom line is, he said, "the last five years of excess demand are not
sustainable."
On the positive side, housing demand is being driven by need, not speculators.
This year, Mr. Oppenheimer said, will be the third best ever for home sales.
But there are worries about affordability and about consumers taking on risky
mortgage products to get into a home.
Among the ways Fannie is looking to counter those worries, is that it has introduced
a 40-year fixed-rate mortgage product to its menu. It is also now allowing an interest-only feature to be added
to a fixed-rate mortgage. In this way, the consumer has no exposure to rate changes.
Mr. Oppenheimer said originators should consider marketing these products to adjustable-rate
mortgage borrowers to refinance them.
For emerging markets products, Fannie Mae has cut its mortgage insurance coverage
requirements for loans originated in the My Communities program to charter levels.
In response to requests from originators to be more flexible towards borrowers
without traditional income and credit, Fannie Mae is working on making changes in this area.
He spoke about the growth in the subprime market over the last couple of years.
Much of this product is in ARMs and when they adjust in the next couple of years, many borrowers will see large
payment increases.
Fannie Mae is looking to assist originators in touching this market, as there
are many of these borrowers who qualify for conventional financing.
The company has completed the largest restructuring of its single-family operations.
It "began by listening to our customers," Mr. Oppenheimer said, with the goal of "getting out of
the way of ourselves."
In the new organization chart, the customer is on top, and it wants to provide
faster and more flexible responses.
There is competition in the secondary market and "we want to earn your business,"
he said.
Freddie Mac senior vice president of single-family sourcing Paul Mullings made
similar comments at the conference. "Penetrating the purchase money market, that's become the focus. And that
requires some changes," he said, continuing that Freddie Mac also plans to be more flexible. "No matter
the interest rate environment, no matter that product, don't miss a chance to have us try to help."
For example, alt-A loans are now one of Freddie Mac's core products.
In addition, Freddie Mac has reduced the time it takes to do business with it.
Sellers can go from contract to loan delivery in three weeks, instead of three months. It has speeded up the funding
process as well.
It also is looking to provide tools to allow originators to serve the emerging
markets. "We've revamped our affordable products around a new line called Home Possible. Think of these loans
for people who don't earn a lot of money, who can't bring a lot of money to the table and whose credit is not perfect.
"Many of these people can meet a mortgage obligation, and we want to provide financing for these loans,"
Mr. Mullings said.
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