Magazine article American Banker

Fannie-Freddie Volume Battle a Standoff in Second Quarter

Magazine article American Banker

Fannie-Freddie Volume Battle a Standoff in Second Quarter

Article excerpt

WASHINGTON -- Fannie Mac and Freddie Mac engaged in a spirited battle for business in the second quarter even as their total volume shrank by a third.

The outcome was a draw, with each agency cornering about the same market share as it did in the first quarter. But the struggle is far from over, and both agencies continue to repair damage and fine-tune their strategies.

Fannie Mac, the Federal National Mortgage Association, said it bought 54.7% of all loans sold to the two agencies. That was up slightly from 54.2% in the first quarter.

Lenders said both agencies were willing to make better deals - both on terms and on price - in the face of a shrinking market, strong competition from portfolio lenders, and a shift to adjustable-rate mortgages.

They said Freddie Mac, the Federal Home Loan Mortgage Corp., was cutting guarantee fees as its securities lose ground against Fannie Mae's.

Freddie's security, which commanded up to a quarter-point more than Fannie's last year, now fetches only about one-sixteenth of a point more than Fannie's, according to Michael Conway, executive vice president of secondary market pricing at North American Mortgage Co., Santa Rosa, Calif. As the gap has narrowed,

"Freddie Mac is trying to respond, by lowering its fees," Mr. Conway said.

But "Fannie Mac doesn't want to abdicate its leadership. There's a real battle going on."

Fannie Mac appears to be reducing its guarantee fees for some lenders, as well as negotiating more flexible credit terms. …

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