Remarks Adapted From Comments Delivered by Timothy J. Mayopoulos, President and CEO, Fannie Mae at 2015 MBA
MBA Annual Convention, San Diego, CA
It is always a pleasure to be here with you, our customers and business partners. I also want to thank Dave Stevens and the MBA for the successful strategic partnership and the productive work we have accomplished together over the past year. In addition, let me thank Bill Cosgrove for his partnership and let me welcome Bill Emerson to his new role as Chairman of the MBA. Most importantly, on behalf of Fannie Mae, thank you to our customers for your business.
At last year’s annual MBA conference, I spoke of our recommitment to you and to becoming your most valued housing partner. Today, I want to provide an update on our actions to follow through on that commitment.
First, we are improving our tools and data at the front end, which means less risk for you and for taxpayers. Second, we are using these improvements to expand access to credit for qualified borrowers. Third, we are laying off more credit risk to private capital and away from taxpayers.
We want to be your trusted secondary market partner providing the services and capabilities at the front end to give you more certainty and clarity in working with us. And, we want to provide the data and standards that are attractive to investors so we can draw global capital to our country.
This is a new ecosystem in housing finance. It is a very substantial move forward. Working together with you, we are fundamentally changing how mortgage origination happens in this country. Let me take a few minutes to describe the work we are doing in these areas.
Based on your feedback, we have delivered and will continue to introduce innovative tools that provide value to you and reduce risk for the taxpayer. We will continue to enhance, improve, and innovate.
Our goal is to make your experience as a Fannie Mae customer simpler and more certain. This is an iterative process and it’s a very different than the way we worked together in the past. Together, we have made real progress. A few examples:
Last year at the MBA Convention, I introduced our Collateral Underwriter™. Since then, more than 1,300 lenders have used it, free of charge, to gain greater certainty on more than half a million appraisals. This past spring, we linked Desktop Underwriter® to Collateral Underwriter to make it simpler for you to get an integrated risk view on your loans.
We are also adding new capabilities, such as third-party income verification, to Desktop Underwriter. Ultimately, we will be able to verify information on a number of things, such as collateral, income, and credit. These tools dramatically enhance our ability to inspect data, provide greater representation and warrant relief, and drastically reduce the number of repurchases.
We recognize to do this right we need to make it easier for you to work with us. That is why we introduced new committing and loan delivery systems that are simpler to use.
In addition, next month we will introduce Fannie Mae Connect. It is a new self-service portal that brings together a range of key reports that you rely on. Fannie Mae Connect will alleviate the manual processing headaches that you have endured for many years.
These are just a few examples. We announced others in our press release this morning and I encourage you to speak with your Fannie Mae team about how these actions benefit you and your business.
These changes on the front end are helping drive changes in expanding access to credit for qualified borrowers. At last year’s MBA, I announced our reintroduction of a 97 percent loan-to-value product. We recently introduced HomeReady™ to expand access to credit to additional creditworthy borrowers.
The HomeReady solution is the direct result of your feedback. HomeReady offers flexibility on the source of down payments and allows the borrower to consider income from non-borrower household members. This can be a big help to extended families, minority families, and non-traditional families. We have also expanded access to HomeReady by having higher income limits in census tracts with low income, census tracts with higher concentrations of minorities, and designated disaster areas. And HomeReady offers online homeowner education, including the opportunity for counseling for the life of the loan to help the borrower be successful. Together, all of these actions add up to a simpler and more certain process for you and a sustainable mortgage for the borrower.
In addition, these actions are helping drive further changes to our business. Ten years ago, the primary driver of our revenue was our portfolio of mortgage holdings. Today, the main driver is guaranty fees, which is a more reliable, predictable, and stable source of revenue.
It is also less of a risk for taxpayers. We have reduced the size of the retained portfolio. If you remove the loans we bought out of trust the investment portfolio is down from about $900 billion at its peak to less than $200 billion today. We are developing dynamic credit risk management capabilities through a variety of capital markets risk transfer transactions and reinsurance deals. This attracts global capital to the United States to invest in mortgage credit.
In the past, we acquired credit risk and held it through the life of the asset. Today, we are not only holding credit risk, but also moving some of that risk away from taxpayers to private capital. Over the past two years, we have developed a substantial new market to share credit risk that has reinvigorated private capital investment in mortgage credit.
We want to be the trusted intermediary, providing service and capabilities at the front end that create more certainty for you and better data and standards that are attractive to investors. By the end of the year, we anticipate that we will have transferred a significant portion of the credit risk on more than half a trillion dollars of loans. As we experiment in this space, we are committed to a level playing field for all lenders.
In our Multifamily business, we continue to lay off risk with every transaction as a result of our risk sharing program with lenders. Going forward, we intend to expand and enhance our delegated underwriting and servicing model. Our goal is to serve the widest possible spectrum of the multifamily market. These changes and enhancements are not the end of the journey. However, they are a significant shift toward a more reliable and sustainable business model.
I appreciate your partnership and I believe that strong partnerships create opportunities. Opportunities for all of our companies, for homeowners, and for housing finance.
Let me close by reaffirming my commitment to listening and that your voices will continue to drive change at Fannie Mae.