Magazine article Mortgage Banking

More Transparency. (on the Road)

Magazine article Mortgage Banking

More Transparency. (on the Road)

Article excerpt

NOT CONVINCED THERE IS ENOUGH privacy and security in online transactions, Deborah Beck, executive vice president of planning and technology for Northwestern Mutual Life Insurance Co., Milwaukee, says the company has been "holding back from doing more online." But as privacy and security improve, "we will want to do more," she said in May at Cambridge, Massachusetts--based Forrester Research Inc.'s sixth annual Finance Forum, "Winning the Next Financial Services Consumer."

Former Fannie Mae Vice Chair Jamie Gorelick addressed suggestions that the government-sponsored enterprises (GSEs) should provide greater disclosure of data on loans in their mortgage-backed securities (MBS). During a discussion at the Mortgage Bankers Association of America's (MBA's) National Secondary Market Conference in New York in April, Gorelick said, "Too much disclosure ruins the liquidity of MBS...." Gorelick left Fannie Mae effective July 1 to join a Washington law firm. She said the GSEs have "gone to great lengths to create incredible transparency. [But] we have to be sources of strength in the housing finance community, and [that means] we have to be very careful in responding to increased disclosure [so as] not to ruin the very way our industry has found its strength."

Too much disclosure, Gorelick also said, would cause investors to be more "discriminating in their purchases," thus pitting individual issuances against one another--to the detriment of the perceived weaker ones.

Steve Magerus, vice president of capital markets for First Franklin Financial, San Jose, California, said at the MBA Secondary Market Conference that best execution in the secondary market means keeping the loan pool intact. It is best, he suggested, "not to slice the pool and look for investors that have an appetite for a certain credit band, or cut product types into two."

A panelist at the MBA conference, Magerus insisted that "The best way for us to sell our product in the secondary market is to take the entire risk profile and put it out there on a consistent basis, and build our pricing and our assumptions around the product." In other words, he said, avoid trying to "'slice and dice' and get various hot bids that are out there."

With its Real Estate Settlement Procedures Act (RESPA) reforms, the Department of Housing and Urban Development (HUD) is essentially "encouraging everyone to be a [loan] packager, to a degree," said Stan Benavides, senior project manager for GHR Systems Inc., Wayne, Pennsylvania. Although the Good Faith Estimate (GEE) would be "simpler" under the reforms, Benavides--a panelist at the MBA Secondary Market Conference--said it also would have "more bite," because the proposed rule requires the GEE quotes to be accurate to within certain tolerances. As a result, lenders might opt for the Guaranteed Mortgage Package Agreement, which would guarantee the borrower's closing costs to a set figure. Some say that raises the philosophical question: Who owns the customer?

One answer, supplied by Ronald Rosenfeld, president of Ginnie Mae, unsettled some attending the MBA Secondary Conference. Rosenfeld said he would not be surprised "if the mortgage banking industry, in the future, was not run by mortgage bankers. …

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