Magazine article American Banker

Group Criticizes Fannie over Payment-Skipping Program

Magazine article American Banker

Group Criticizes Fannie over Payment-Skipping Program

Article excerpt

Only a week after rolling out its new name and introducing a high-profile chairman, FM Policy Focus went on the attack by accusing Fannie Mae of illicitly entering the consumer lending market.

The coalition of large mortgage lenders -- formerly known as FM Watch -- said in a conference call Tuesday that a Fannie pilot program called PaymentPower, which allows borrowers to pay an up-front fee for the right to skip up to 10 payments over the life of a mortgage, violates the government-sponsored enterprise's charter.

Former Rep. J.C. Watts, who took over as the group's chairman last week, said that the program is risky and runs counter to Fannie's mission. He added that it should have been subject to a preclearance process through the Department of Housing and Urban Development but was not, because no process has ever been established.

"While Fannie Mae's PaymentPower program raises many questions about the company's charter, its mission, its special privileged status, its regulators, and exactly whether or not consumers benefit, its mission regulator doesn't seem to be asking them," Mr. Watts said.

He also said that he had written a letter to HUD asking it to step up its scrutiny of Fannie.

In a press release issued Tuesday by Chuck Greener, a senior vice president, Fannie dismissed the group's claims.

"This is an initiative that was developed at the request of our lender partners to provide flexibility to homeowners in managing their mortgage payments," he said. …

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