Magazine article American Banker

Fannie Mae Keeping an Eye on Servicers' Hurricane Response

Magazine article American Banker

Fannie Mae Keeping an Eye on Servicers' Hurricane Response

Article excerpt

Byline: Bonnie Sinnock

Expected losses from the recent hurricanes put a dent in Fannie Mae's third-quarter earnings and the mortgage agency is keeping a close eye on how its servicers manage the pressures of the recovery effort.

"Servicers are having challenges," especially in Puerto Rico, where there are fewer companies that manage loans, Fannie Mae President and CEO Timothy Mayopoulos said in an interview.

But he added that, "I haven't heard any servicer say they are not capable."

About 80% of the $1 billion that Fannie Mae set aside during the third quarter for hurricane-related expenses is expected to cover losses on single-family loans in Puerto Rico. About two-thirds of the $900 million that Freddie Mac set aside for hurricane losses is earmarked for Puerto Rico.

"If you put aside the hurricanes, our earnings were very much in line with what we have expected," Mayopoulos said. The agency earned $3 billion in net income during the quarter, down from $3.2 billion in both the previous quarter and a year ago.

Despite the increased reserves for the hurricanes, Fannie's combined loss reserve was $20.5 billion in the third quarter, down from $20.7 billion in the second quarter, due to the improving housing market.

The hurricane loss reserve estimates have a high margin of error, and there is no doubt they will be "adjusted up or down" to one degree or another going forward, he said. The storms are putting more stress on the agency's reserves, which are declining.

Fannie is considering extending its broader approach to automating processes for lenders and servicers in order to make their work more efficient to disaster relief in response to the hurricanes.

"We're trying to reduce the number of steps involved in any of these processes automate as much as practical," Mayopoulos said. …

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