The Fannie Mae Advantage: A Strategic Wake-Up Call for Mortgage Executives

Approval, Execution, Sustainability

Bank, Credit Union, and IMB Mortgage Executives – the timing is NOW to revisit your strategic goals and to realign with Fannie Mae.

Despite the “chatter” of what FHFA may or may not do with the unwinding of the GSE’s conservatorship or potentially merging them, this feat would take many years to accomplish. In addition, any immediate action would likely only further disrupt what is an already stressed housing market and potentially put at risk the current liquid Mortgage-Backed Security investment structure that investors rely on to fund the housing market.

If you aren’t selling to Fannie Mae now or recently lost your Fannie Mae approval because you didn’t sell to them directly, I will cover today the three critical topics needing to land on your firm’s C-Suite desk.

Bottom line, the question is, as we gear up for lower interest rates that will be coming, will your mortgage team decide today to improve its Loan Origination options by leveraging all the benefits that Fannie Mae brings to the table within Capital Markets, or not? Warning, if you don’t, your competitors are doing so. How do we know? Because we are getting the calls.  

As a veteran Capital Markets Senior Executive in the IMB space, as well as a consulting Housing and Finance Agencies, Credit Unions, and Community Banks I implore you to become an approved Seller/Servicer with Fannie Mae. The benefits are non-negotiable when considering the housing market that is evolving in front of our eyes. The time has never been better to become a Seller/Servicer.   

Approval

Let’s start with the Seller/Servicer approval process itself. The process can be similar to what Correspondent Aggregators ask for their approval. Let’s face it these firms are purchasing closed loans that have been originated, underwritten, closed, and then are delivered to the GSE’s under either Fannie Mae or Freddie Mac requirements. To have the ability to funnel these loans to either of the GSE’s, Correspondent Aggregators mirror their processes, requirements and contractual obligations to what they have to then agree to with either of the GSE’s.  Makes sense, right?

Now, you will need to be prepared for your firm’s history, background and internal structure to  be evaluated and scrutinized. Your Financial/net worth position, Loan Origination mix, Quality Control Plan, Investor Scorecards, Loan Servicing information, and Sub-Servicer oversight roles will be reviewed. However, Fannie Mae will take into consideration scenarios based upon your firm’s business model.

The question to ask is are your firm’s processes, experience, policies and procedures adaptable and able to meet Fannie requirements?  For some firms this is an easy “yes”, but for some firms it may be a “I’m not sure” answer. 

Beware, if you’re not sure or the answer is no – do not buy policies and procedures off the shelf because Fannie Mae will see right through it and you will likely delay your approval another year. How do we know? It’s why we are hired to help write these policies and procedures after mortgage teams have been denied on their initial application submission. 

Solution: Ask about BlackFin Groups Seller/Servicer Readiness Assessment.

Execution

Being approved is one thing, however the real test is executing to get the full benefits of being a Seller/Servicer to Fannie Mae.   Yes, it’s great to report to the C-Level and your Board of Director’s that your firm has attained GSE approval though the real key to success is the ability to execute. OK, you might say – What’s the issue? Afterall, our firm delivers loans to Correspondent Aggregators, the Federal Home Loan Bank or other investors now.    

The difference is that your firm now becomes the Issuer, and Seller/Servicer directly with Fannie Mae. Learning the features for underwriting, loan programs, loan pricing, salability options: cash window, MBS, servicing retained, or servicing released within the Capital Markets team is where an Execution Strategy becomes hyper critical. When was the last time your firm reviewed the pricing adjustments that Correspondent Aggregators charge for their own risk tolerance as compared to the GSE’s?  There are differences.  

Then, there is the ability to link the processes that occur throughout the loan cycle, to make effective, timely and efficient loan delivery, or issuance of the Mortgage-Backed Security is the critical next step. Loan Origination, Operations, and Capital Markets must run like a well-tuned engine. The impact here is significant, timely delivery produces the needed gain on sale via several different avenues. In these times when margins are thin, and in cases have eroded from where your firm was several years ago – ask the question: “How can my firm benefit from a strategy that improves loan products, capital markets execution, and profitability?”

Beware, in the consulting world folks will offer to help you work through a checklist to successfully, ‘submit’ an application. Unfortunately, we end up getting the calls afterward because the lender was unable to then   successfully execute being a Seller/ Servicer.

Solution:  Work with industry experts (BlackFin) that has collectively more than 60+ years experience of “boots on the ground” in Capital Markets. Not just advisors but have been mortgage lenders standing up the ability to sell direct.

Sustainability

I recall being at a Fannie Mae conference several years ago, and the speaker addressed the “sustainability” importance of business relationships. I also recall key messaging that I have heard from more than one successful C-Level Executive – “People do business with firms they trust.” 

That’s where sustainability comes into play. Firms must have ongoing methods in which to measure their performance when selling loans in the secondary market. When you choose to become Seller/Servicer approved, it is critical to maintain positive and proactive relationships. Part of this is developing a key point of contact within your firm who “owns and manages” investor relationships and eligibility.

Having had this role with an IMB as well as leading the eligibility oversight at a Housing and Finance Agency, this is a role that should not be overlooked. It provides the necessary proactive market reputation within the Capital Markets space with anyone your firm does business with, and trust is developed. This is a role that should also report directly to the C-Suite, for 100% transparency. In the long run a company is only as good as “doing what it said it would do, when it said it would do it.”

Solution: BlackFin Group works in collaboration with C-Level Executives to form your firm’s long-term business relationship structure and strategy so you can maximize the benefits of the Fannie Mae relationship.

Over the years I continue to be asked, why is a Seller/Servicer relationship with Fannie Mae so important? My answer is always quick and to the point, “Having a relationship with Fannie Mae is the key to critical competitive pricing and product options. And, especially in markets like today and what’s coming – WHY NOT?” I encourage you to reach out to the team at BlackFin Group so we can discuss these three pillars for success. Waiting will only hurt you. The market is changing – join in!

Luana Slettedahl is a Principal Consultant with BlackFin Group in the Mortgage Strategy Practice. Luana brings forty years of diversified experience in Capital Markets, Mortgage Servicing Rights, GSE and Ginnie Mae relationship management and Seller / Servicer requirements.  Her understanding of how to successfully do business with the GSE’s and Ginnie Mae, has made her a significant asset to her clients. For more information contact info@blackfin-group.com