Perspectives

Fannie Mae Continues to Make It Easier for Lenders to Grow their Business

Joe Grimes

The potential for business growth is on mortgage lenders’ minds. How to do that is also top of mind.

According to Fannie Mae’s Mortgage Lender Sentiment Survey®, “88 percent of the lenders surveyed reported that they are looking to grow their mortgage origination business, and 76 percent of the lenders surveyed reported plans to grow their mortgage servicing business.” (02/24/2016 FM Commentary by Doug Duncan, Fannie Mae Senior VP and Chief Economist)

But while depository institutions cite "cross-sell opportunities to other financial products” as a key way to fuel growth, non-depository mortgage bankers tend to have fewer options. Many rely on warehouse financing or lines of credit secured by mortgage servicing rights (MSRs) to support growth as well as balance sheet management and liquidity.

Fannie Mae does not provide warehouse loans or other lender financing. However, our consent is required when MSRs on loans we own or guarantee are pledged as collateral. Recently, we took a hard look at our own requirements and concluded that we could do a better job of facilitating the process to help our customers. Our form of Acknowledgment Agreement – which lays out the terms between us, the servicer pledging MSRs as collateral, and the servicer’s warehouse lender (or other financier) – was overly complicated and full of dense legal language.

We knew we could do better. So we set about gathering feedback from a panel of warehouse lenders, and then we got to work. The results? Our new Acknowledgment Agreement, which:

  • Is written in plain English
  • Is streamlined and easier for business readers to navigate
  • Provides greater clarity regarding the rights and obligations of Fannie Mae and the financing provider
  • Recognizes that our servicers may wish to pledge MSRs to, and enter into Acknowledgment Agreements with, more than one warehouse lender
  • Affords the financing provider the options to either exercise a right of assumption with respect to the pledged servicing or to request a distribution of excess servicing proceeds from Fannie Mae
  • Includes specific timeframes for Fannie Mae to perform particular activities and provide notifications, providing greater certainty to our customers and their financing providers

Updating a single document may not sound like a big deal, but it’s just one of the many things Fannie Mae is doing to help lenders grow their business and simplify doing business with us. It’s important to us that we enable our lender partners to better manage their businesses and achieve their goals. By making it easier for customers to obtain financing secured by MSRs, more lenders can have certainty in their business. This is just one way we are listening to our customers and working hard every day to be America’s most valued housing partner.

Joe Grimes
VP, Customer Account Risk Management