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FM Commentary

Expanding Options to Meet Changing Needs

Jennifer WhipBusiness strategies for many lenders and servicers are changing. Some large institutions are ending or shrinking their loan aggregation or loan servicing businesses, opening opportunities for smaller lenders to take on new or expanded roles. Credit unions, for example, originated more than 8 percent of U.S. mortgages during the first quarter of this year, a new record for that sector.

As regional banks, community banks, credit unions, independent mortgage bankers, and other lenders diversify their businesses, Fannie Mae is making changes to meet their evolving needs. Originators who want to become approved Fannie Mae sellers, for example, now encounter a simpler, more transparent application process. A Fannie Mae sponsor will stay in touch throughout the process, ready to offer updates and answer questions. We also offer more than 50 recorded tutorials and job aids to help customers expand their skills.

Fannie Mae has always worked with a variety of lenders, but we see growth in business from the small to mid-sized lender sector. During the first five months of 2012, 42 smaller lenders delivered their first loans to Fannie Mae.

As a matter of policy, Fannie Mae may establish mortgage loan volume limitations specific to a lender, which may be applicable to whole loan and MBS sales and deliveries. Policies and procedures are spelled out in our Single-Family Selling and Servicing Guides.

Servicing is an important issue for many smaller lenders who seek alternatives to aggregator relationships. Since today’s market offers historically low mortgage rates and high-quality current loans, some lenders are seeking to build long-term value by servicing the loans they originate. One practice that is becoming more common is the use of a sub-servicer. This allows the lender to retain the value of the servicing asset and maintain a direct relationship with their customer, while relying on the operational expertise of a sub-servicer to manage payment collections and loss mitigation activities.

Lenders may choose to sell servicing on some or all of their origination volume to generate operating income/cash flow. Fannie Mae offers a variety of execution options that allow lenders to sell or retain mortgage servicing rights. In addition, we offer mandatory and best efforts executions and servicing-released options. With this range of options, lenders can make the right decision for their business.

For example, we have developed execution structures that include the bifurcation of selling and servicing representations and warranties:

  • When originators sell servicing to a servicing buyer, Fannie Mae looks to the originator for selling reps and warrants and the servicing buyer for servicing reps and warrants.   
  • At present, more than 50 originators are approved to participate in an execution structure that includes bifurcation of selling and servicing reps and warrants.  
  • We expect to offer approved originators additional servicing structures with regional servicing buyers by the end of the year. 
  • We are expanding our eCommitOne®/Servicing Execution Tool™ (eC1™/SET™) to offer bifurcation of selling and servicing rep and warrant structures for sellers that want a servicing-released option for single loan whole loan commitments to Fannie Mae.

Fannie Mae provides more than 1,100 lenders of all sizes with access to credit and liquidity. While our customers’ business strategies may change, Fannie Mae’s goal to support a stable, liquid, and efficient mortgage market remains constant.

Jennifer Whip
Vice President for Customer Management

July 19, 2012

The views expressed in these articles reflect the personal views of the authors, and do not necessarily reflect the views or policies of any other person, including Fannie Mae or its Conservator. Any figures or estimates included in an article are solely the responsibility of the author.

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