Remarks Prepared for Delivery by Timothy J. Mayopoulos - MBA Annual Conference
MBA Annual Conference, Chicago, IL
I’ve enjoyed the lively and candid discussions and appreciate our strong working relationship with the MBA.
One particularly important part of my first few months as CEO has been listening to your perspectives and sharing my own about how together we will support the housing recovery and lay the foundation for a better housing finance system. I know that we won’t always agree on how to achieve these two goals. However, I believe our ongoing dialogue is critically important to our achieving success.
Let me spend a couple of minutes on Fannie Mae today and then go into more detail on our priorities.
Fannie Mae today is a different company with different leadership, different constituencies, and different priorities. More than 80 percent of the current senior management team was hired or promoted into their roles following conservatorship. Every member of Fannie Mae’s management committee has joined the company or been promoted into his or her current role since the housing crisis. And more than half of our 7,000 employees have been hired since conservatorship. At the same time we have been able to retain many of the highly talented and experienced people who have been the core of Fannie Mae for a long time. Suffice it to say, the people of Fannie Mae today are part of the solution, not part of the problem.
In addition to new leadership and new employees, Fannie Mae serves different constituents. The company is no longer run for the benefit of private shareholders. Instead, it is managed in the overall interest of taxpayers, which is consistent with the substantial public investment in the company. Fannie Mae’s financial condition has improved significantly, and our expected ability to deliver value to taxpayers has grown markedly. In the first six months of 2012, we reported $7.8 billion in net income, and to date the company has paid $25 billion in dividends to the Treasury.
Our priorities also are well aligned with the public interest. We are committed to funding the mortgage market, assisting troubled borrowers, and building a strong, new book of business that will help return taxpayers’ investment in our company. We have been the leading source of funding for the market, helped millions of homeowners through modifications and refinancing, and acquired a new book of business applying sensible credit standards.
Today, our two equally important priorities are first, to support the housing recovery, and second, to help lay the foundation for a better housing finance system going forward.
Supporting the Recovery
We are working hard to support the slow, but growing, housing recovery. We have been the leading source of liquidity since the start of the economic crisis. Since 2009, we have provided nearly $2.7 trillion in funding for single-family and multifamily loans, enabled 8.1 million homeowners to refinance their mortgages, and helped 2.2 million households to purchase a home.
We have been particularly encouraged by the record volumes of refinancing under HARP. This is a great example of an area where we listened to lender feedback and we are seeing the benefits. For instance, FHFA reported more than 618,000 HARP refinances in the first eight months of 2012, which is more than the total HARP refinances for all of last year (400,024). In addition to HARP, we expanded our own suite of proprietary refinance programs—including Refi Plus™ and DU Refi Plus™—to bring as much value to consumers as possible. Finally, we have provided financing for over 1.3 million units of multifamily rental housing.
Through the first two quarters of 2012, we have reported record business volumes and provided record liquidity. Well over half of our total book of business has been acquired since conservatorship. It is one of our strongest books of business in memory, and we’ve done this in one of the worst economic environments since the Great Depression.
While gratified that we have been able to provide this level of liquidity to the market, we recognize that the GSEs are playing an outsized role. Fannie Mae’s single-family market share was approximately 41 percent at the end of 2011. In a properly functioning market, Fannie Mae should not have such a significant share. We have worked to attract more private capital by working with FHFA to raise guaranty fees, transferring risk to third parties, and taking other measures. However, more than four years after the onset of the financial crisis, we see little evidence of substantial private capital ready to meet the market need.
We’ve taken steps to sustain critical liquidity for the market, but we continue to be concerned about market capacity. We’ve seen significant deconsolidation in the industry as major market participants have pulled back or left the market entirely. Moreover, we are hearing a lot about lenders being reluctant to extend credit. There are many potential reasons for this, such as repurchase risk, regulatory concerns, and lack of underwriting capacity. These issues clearly need to be addressed by the industry, and we will continue to try to do our part. For example, we are working with FHFA to enhance our current representation and warranty model, and we announced a new framework that gives us and our lender partners a much earlier and more comprehensive look into loan quality in an effort to reduce repurchase risk.
In addition to providing critical liquidity to the market, we are taking a leading role in helping homeowners avoid foreclosure.
We seek to have our servicers intervene earlier and to offer borrowers alternatives to foreclosure that require less documentation and easier implementation. Since 2009, we’ve helped more than one million homeowners retain their homes or otherwise avoid foreclosure, which supports neighborhoods, home prices, and the housing market.
We work directly with homeowners in distress through a network of 12 Fannie Mae Mortgage Help Centers in hardest hit communities across the country to supplement the work of our lenders. In 2012, 69 percent of the borrowers we’ve helped through the Centers have been able to stay in their homes. In addition to our brick-and-mortar efforts, we also offer innovative online tools such as KnowYourOptions.com. The KnowYourOptions website provides information for borrowers who are interested in getting a mortgage or refinancing a mortgage. It’s also a terrific resource for borrowers in distress and provides many tools and the information they need to take action early. The site has received more than 4.3 million unique page views in 2012 alone.
Finally, we continue to reduce our legacy book of business by working our way through seriously delinquent loans. Our single-family serious delinquency rate has declined nine consecutive quarters, and it is substantially lower than private market levels.
Building a Better System for the Future
Our second equally important priority is to lay the foundation for a better housing finance system that operates smoothly and effectively on a go-forward basis.
We believe a better system needs to be safer and more transparent for everyone—lenders, investors, and consumers. At Fannie Mae, we are working to establish and implement industry standards; develop better mechanisms to price and manage credit risk; build new infrastructure to ensure a liquid and efficient market; and facilitate the collection and reporting of data for accurate financial reporting and risk management.
Let me give you a couple of examples of how we are doing this.
First, Fannie Mae and Freddie Mac are collaborating to develop a new securitization platform as a utility for the market. FHFA released a whitepaper earlier this month, seeking industry input on our proposals as to how the utility will operate, how it will be built, and the business issues it will address.
Second, we continue to innovate to ensure loan quality and provide tools to help our lender partners improve the loan manufacturing process. These initiatives include:
Developing and implementing the Uniform Mortgage Data Program;
- Collecting and reviewing electronic appraisal information;
- Starting in January, providing new messaging to lenders of potential appraisal defects; and
- Implementing our EarlyCheck service to identify eligibility and data issues prior to origination and loan delivery.
These efforts will help lenders improve their processes, help us at Fannie Mae know what’s being delivered to our doorstep, and importantly, reduce the potential for issues that can be challenging for both lenders and us down the road.
We are committed to being a leader and a good partner. I believe that together we can solve the nation’s housing issues today, and change the way people experience homeownership in America for generations to come.
Thank you for your partnership and your support.