How Fannie Mae Portfolio Loan Bulk Securitizations or Whole Loan Sales Benefit Lenders
By Kerry Curry | September 22, 2015
Fannie Mae’s bulk securitizations or whole loan sales can help drive simple and certain solutions for lenders by providing a variety of benefits to banks and credit unions that hold seasoned mortgages in portfolio.
Jennifer Whip, Vice President of Customer Engagement at Fannie Mae, says banks may have increased interest in asset liability management especially if they expect interest rates to increase in the future.
“They may be able to sell loans today, which can generate cash for the company and then reinvest the proceeds into higher interest-rate mortgages or other asset classes,” she says. “If a bank is trying to manage its assets and liabilities effectively, Fannie Mae can offer solutions for that, allowing customers to generate earnings.”
Below are several reasons a financial institution might utilize bulk transaction:
1. Provide liquidity. “By selling or securitizing a bank’s whole loans, we can improve a bank’s capital position,” says Ralph Bonner, a customer account manager with Fannie Mae. “For example, securitizing the loans and retaining the MBS as an asset in portfolio would reduce the bank’s risk-based capital requirements while enabling it to retain the underlying collateral.”
2. Manage profits. A bank or credit union could take profits via a sale of their whole loans and invest the proceeds in other parts of the business. These profits might be used to fund the acquisition of other institutions. A bank that acquires another institution, for example, could potentially use the certainty of execution provided by Fannie Mae’s bulk transaction process to sell the mortgage portfolio of the acquired bank to fund the transaction.
3. Manage interest-rate risk, asset-concentration and liabilities. A financial institution could sell loans out of portfolio to manage its interest-rate risk and asset-concentration risk. If a bank has a lot of real estate mortgages on its books, for example, it could decrease that asset allocation via a bulk transaction.
Fannie Mae offers three execution options to meet lenders’ financial needs through a bulk transaction:
- Depository sales: In a whole loan to cash sale, the lender sells whole loans and receives back cash. This is the most popular bulk transaction. Proceeds are typically received two days following a clean delivery.
- MBS swap-and-hold. The lender sends in whole loans and receives a security comprised of those whole loans.
- MBS swap-and-sell. The lender sends in whole loans and receives an MBS that is then sold to MBS investors. Fannie Mae’s Capital Markets Sales Desk can assist lenders with their securities sales to the market.
Where Can Lenders Get More Information?
Fannie Mae’s bulk transaction team is here to help. The team is experienced and knowledgeable and can discuss and address lenders’ execution needs. The process is simple and straightforward, requiring fewer data elements than loans sold on a flow basis.
“We have successfully assisted numerous clients with residential mortgage portfolios of all sizes ranging in value from $2.5 million to $2.5 billion,” says Charles Sull, pricing manager in Fannie Mae’s Capital Markets division.
Lenders should contact their account teams to get started. Fannie Mae’s team stands ready to assist with the data submission, bid and delivery process. See here for more information on bulk transactions.
Kerry Curry is a freelance writer for several Texas and national publications and is the former executive and magazine editor of HousingWire.