Fannie Mae CEO: ‘We need a better strategy than hoping’
October 28, 2013, 3:57 PM
Fannie Mae is getting its house in order, at least according to its CEO.
Tim Mayopoulos said Monday that the government-backed mortgage giant has “advanced” its underwriting standards, polished how it collects data, and developed better tools for inspecting the loans it buys.
He also said that the loans Fannie FNMA is buying now are of much greater quality than before. The bank is filing repurchase demands – that’s when Fannie asks a bank to buy back a mortgage it sold to Fannie – on 0.25% of loans it has bought since 2009. It filed repurchase demands on more than 3% on loans bought from 2005 to 2008.
Mayopoulos, a former Bank of America Corp. BAC executive who took the top job at Fannie last year, also indicated that his agency will speak up when it thinks it might be buying loans that aren’t what they appear.”We will be freely sharing our insights about potential issues with originators,” he said.Though the banks have been blamed for being misleading about the quality of the mortgages they were selling in the run-up to the financial crisis, Fannie and Freddie Mac FMCC have also been criticized for loading up on mortgage purchases without property scrutiny. Fannie and Freddie had to be effectively nationalized in 2008 because of their heavy mortgage-related losses, and taxpayers have spent billions keeping them afloat.
Mayopoulos also said that private investors appear less than eager to get into the mortgage market. He said Fannie has taken steps to encourage private investors to wade back in but, he added, “we need a better strategy than hoping that private capital will fund this market.”
His remarks at the annual convention of the Mortgage Bankers Association in Washington come fresh on the heels of a mortgage-repurchase victory. Late Friday, the Federal Housing Finance Agency, which regulates Fannie and Freddie, announced that J.P. Morgan Chase & Co. JPM would pay $5.1 billion to settle accusations that it misled Fannie and Freddie about mortgages and mortgage-backed securities it sold them. Fannie is to receive about $1.9 billion from the settlements, with the rest going to Freddie Mac.
-Christina Rexrode
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