Magazine article American Banker

Fannie Tries to Allay Lenders' Automation Fear

Magazine article American Banker

Fannie Tries to Allay Lenders' Automation Fear

Article excerpt

Top Fannie Mae officials have stepped up their drive to reassure lenders that new loan-processing technology will not cut mortgage banks out of the system.

In speeches, press conferences, and presentations to lenders at a convention of the Mortgage Bankers Association, executives of the Federal National Mortgage Association, or Fannie Mae, tried to drive home one point: Their agency's new technology is being developed to help lenders, not hurt them.

In an address to the convention, Fannie Mae chairman James A. Johnson told lenders that the agency is "inextricably linked" to mortgage banks. "We see mortgage lenders as our firm foundation," he said, "and the success of our mission depends on the success of yours."

Mr. Johnson told lenders that Fannie Mae's technology to automate loan applications and approvals is "customer-driven." The new systems have been tested by lenders and are intended to bolster their profitability. Fannie Mae's broad technology plans have stirred the industry's fears. Rival Freddie Mac, formally the Federal Home Loan Mortgage Corp., is taking a more limited approach, restricting its automation system to underwriting.

Freddie Mac executives rarely miss an opportunity to make that contrast clear.

Last Thursday, Fannie Mae vice chairman Frank Raines went on the offensive, taking on Freddie Mac's underwriting system.

At a lunch for reporters, Mr. Raines said that Freddie Mac's underwriting technology is intended to force lenders to sell their loans to Freddie Mac.

That's because only Freddie Mac understands why it chooses to accept a loan through its credit-scoring system, Mr. Raines said.

By contrast, he said, decisions made on Fannie Mae's technology are easily understandable because the system is rule-based, simply automating Fannie's existing rulebook.

So a loan approved on the Fannie system could just as easily be sold to Freddie, he said. …

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