Written By: Joel Palmer, Op-Ed Writer
While regulators and legislators debate the current and future structure of Fannie Mae, the agency has been spending much of 2017 talking about its focus on customers.
In the last month, executives from Executive VP Andrew Bon Salle to Chief Financial Officer David Benson have given interviews on the subject of Fannie’s customer-centric initiatives. Earlier the month, the agency published its 2016 Progress Report, which detailed many of these programs as well.
The overall message: Fannie is working to help more borrowers obtain financing and to help lenders better serve buyers by making the mortgage lending process more efficient and less complicated.
Last month, Fannie announced an initiative to help homebuyers with student loan debt qualify for mortgages. The program included a student loan cash-out refinance option, the exclusion of debt paid by somebody else from a borrower’s debt-to-income ratio, and the ability of lenders to accept student loan payment information on credit reports.
Fannie has also continued touting its Day 1 Certainty program launched last fall, which the agency said “enables more efficient risk management and brings greater speed and simplicity to lenders and borrowers” in the appraisal process, which means “potential time and cost savings in loan originations.”
With Day 1 Certainty, appraised value can be accepted up front to give lenders freedom from representations and warranties. This is accomplished with a qualifying risk score from Fannie’s Collateral Underwriter risk assessment application, and a recommendation of Approve/Eligible from Desktop Underwriter, the company’s mortgage underwriting system. Fannie says that approximately 60 percent of appraisals qualify for representation and warrant relief on appraised value.
“Day 1 Certainty enables lenders to streamline the way they create mortgages,” according to Fannie’s 2016 Progress Report.“It empowers our customers to grow their business and meet market demands. Now, lenders can deliver more loans faster without sacrificing quality, allowing them to lend with confidence to qualified borrowers and provide borrowers with a better customer experience.”
The Progress Report also trumpets the company’s its green financing options, such as the HomeStyle Energy mortgage that enables financing for energy-saving improvements; and the $3 billion in financing Fannie provided for manufactured housing communities–an increase of 282 percent from 2015.
These announcements give an indication that Fannie is pushing ahead to grow its business despite the uncertainty of its future and its GSE counterpart, Freddie Mac.
“After the financial crisis our focus was very much on risk management, helping struggling borrowers, and stabilizing the housing market…as the markets recovered we have directed more of our attention to building a better housing finance system for the future,” said Benson in his interview with the CFO Journal.“We’re in the early stages of developing this more customer-centric culture, and while we’ve made a fair amount of progress over the last couple of years I think there’s a lot more to be done going forward.”
Earlier this month, the agency reported a first-quarter profit of $2.8 billion, while Freddie generated $2.2 billion. Because the GSEs are still in government conservatorship, that combined $5 billion will be handed over to the U.S. Treasury in June.
Many in the industry anticipate Congress and the Trump administration tackling GSE reform sometime this year. However, the continued strong financial showing by the agencies, combined with the recent spate of customer-focused initiatives, means that may be less urgency to develop and implement a reform plan, especially with so many other legislative priorities on the docket.
About the Author
As an NAMP® Opinion Editorial Contributor, Joel Palmer is a freelance writer who spent 10 years as a business and financial reporter and another 10 years in marketing for the insurance and financial services industries. He regularly writes about the mortgage industry, as well as residential and commercial real estate, investments, and retirement income planning. He has also ghostwritten books on starting a business, marketing, and retirement income planning.